10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2014

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from         to

Commission File Number: 001-12697

BPZ RESOURCES, INC.

(Exact Name of Registrant as Specified in Its Charter)

Texas	33-0502730
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

580 Westlake Park Blvd., Suite 525
Houston, Texas 77079
(Address of Principal Executive Office)

Registrant’s Telephone Number, Including Area Code: (281) 556-6200

N/A

(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer ☐	Accelerated filer ☒
Non-accelerated filer ☐	Smaller reporting company ☐
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

As of July 31, 2014, there were 118,557,328 shares of common stock, no par value, outstanding.

TABLE OF CONTENTS

PART I
Item 1.	Financial Statements	3
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations	4
	Consolidated Statements of Cash Flows	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	51
Item 4.	Controls and Procedures	53
PART II
Item 1.	Legal Proceedings	54
Item 1A.	Risk Factors	54
Item 6.	Exhibits	54
SIGNATURES

2

PART I

Item 1. Financial Statements

BPZ Resources, Inc. and Subsidiaries

Consolidated Balance Sheets 

(In thousands)

	June 30,			December 31,
	2014			2013
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	67,201		$	57,395
Accounts receivable		20,743			21,630
Income taxes receivable		1,973			2,134
Value-added tax receivable		1,494			10,490
Inventory		13,908			17,368
Restricted cash		1,000			1,250
Prepaid and other current assets		6,365			5,419
Total current assets		112,684			115,686
Property, equipment and construction in progress, net		224,806			217,753
Restricted cash		4,109			4,109
Other non-current assets		4,634			5,065
Investment in Ecuador property, net		517			534
Deferred tax asset		60,593			63,602
Total assets	$	407,343		$	406,749
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,643		$	3,127
Accrued liabilities		12,454			11,246
Other liabilities		40,955			24,494
Accrued interest payable		4,883			5,119
Derivative financial instruments		269			30
Current maturity of long-term debt		58,169			-
Total current liabilities		119,373			44,016
Asset retirement obligation		1,730			1,564
Other non-current liabilities		-			16,755
Long-term debt, net		152,787			206,939
Total long-term liabilities		154,517			225,258
Commitments and contingencies (Note 18 and 19)
Stockholders’ equity:
Preferred stock, no par value, 25,000 authorized; none issued and outstanding		-			-
Common stock, no par value, 250,000 authorized; 118,553 and 117,526 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively		571,158			569,061
Accumulated deficit		(437,705	)		(431,586	)
Total stockholders’ equity		133,453			137,475
Total liabilities and stockholders’ equity	$	407,343		$	406,749

The accompanying notes are an integral part of these consolidated financial statements.

3

BPZ Resources, Inc. and Subsidiaries

Consolidated Statements of Operations (Unaudited)

(In thousands, except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Net revenue:
Oil revenue, net	$	24,190		$	12,776		$	45,094		$	26,057
Other revenue		65			39			137			70
Total net revenue		24,255			12,815			45,231			26,127
Operating and administrative expenses:
Lease operating expense		6,744			8,102			11,967			14,775
General and administrative expense		6,375			6,451			12,572			11,926
Geological, geophysical and engineering expense		1,270			746			2,091			1,104
Depreciation, depletion and amortization expense		5,503			7,955			12,115			14,859
Standby costs		-			2,225			-			3,368
Total operating and administrative expenses		19,892			25,479			38,745			46,032
Operating income (loss)		4,363			(12,664	)		6,486			(19,905	)
Other income (expense):
Income (loss) from investment in Ecuador property, net		(9	)		216			(17	)		169
Interest expense, net		(3,513	)		(4,280	)		(7,350	)		(8,578	)
Loss on extinguishment of debt		(1,245	)		(3,786	)		(1,245	)		(3,786	)
Gain (loss) on derivatives		(269	)		1,277			(239	)		729
Interest income		345			38			350			47
Other expense		(96	)		(818	)		(29	)		(1,147	)
Total other expense, net		(4,787	)		(7,353	)		(8,530	)		(12,566	)
Loss before income taxes		(424	)		(20,017	)		(2,044	)		(32,471	)
Income tax expense (benefit)		2,125			(377	)		4,075			(47	)
Net loss	$	(2,549	)	$	(19,640	)	$	(6,119	)	$	(32,424	)
Basic net loss per share	$	(0.02	)	$	(0.17	)	$	(0.05	)	$	(0.28	)
Diluted net loss per share	$	(0.02	)	$	(0.17	)	$	(0.05	)	$	(0.28	)
Basic weighted average common shares outstanding		116,342			115,935			116,193			115,862
Diluted weighted average common shares outstanding		116,342			115,935			116,193			115,862

The accompanying notes are an integral part of these consolidated financial statements.

4

BPZ Resources, Inc. and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

	For the Six Months Ended
	June 30,
	2014			2013
Cash flows from operating activities:
Net loss	$	(6,119	)	$	(32,424	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Stock-based compensation		1,577			1,603
Depreciation, depletion and amortization		12,115			14,859
Amortization of investment in Ecuador property		17			81
Deferred income taxes		3,011			(2,602	)
Loss on extinguishment of debt		1,245			3,786
Amortization of discount and deferred financing fees		4,263			5,071
(Gain) loss on derivatives		239			(729	)
Other non-cash items included in net loss		(32	)		43
Changes in operating assets and liabilities:
Decrease in accounts receivable		887			16,239
Decrease in value-added tax receivable		8,731			5,489
(Increase) decrease in inventory		3,733			(236	)
Increase in other assets		(946	)		(5,770	)
Decrease in income taxes receivable		161			-
Increase (decrease) in accounts payable		(483	)		18,696
Increase (decrease) in accrued liabilities		972			(13,699	)
Decrease in income taxes payable		-			(11,932	)
Decrease in other liabilities		(295	)		(237	)
Net cash provided by (used in) operating activities		29,076			(1,762	)
Cash flows from investing activities:
Property and equipment additions		(19,243	)		(5,403	)
Decrease in restricted cash		250			63,680
Purchase of investment securities		-			(1,000	)
Net cash provided by (used in) investing activities		(18,993	)		57,277
Cash flows from financing activities:
Borrowings		-			14,545
Repayments of borrowings		-			(46,139	)
Deferred and other loan fees		(296	)		(3,654	)
Proceeds from sale of common stock, net		19			25
Net cash used in financing activities		(277	)		(35,223	)
Net increase in cash and cash equivalents		9,806			20,292
Cash and cash equivalents at beginning of period		57,395			83,540
Cash and cash equivalents at end of period	$	67,201		$	103,832
Supplemental cash flow information:
Cash paid for:
Interest	$	9,266		$	9,404
Income tax		1,012			13,785
Non — cash items:
Convertible debt exchanged		26,000			-
Depletion allocated to production inventory		241			18
Asset retirement obligation capitalized to property and equipment, net of revisions		105			-
Property and equipment transferred to / from current assets / liabilities or other non-current assets		-			952

The accompanying notes are an integral part of these consolidated financial statements.

5

BPZ Resources, Inc. and Subsidiaries

Notes To Consolidated Financial Statements

(Unaudited)

Note 1 - Basis of Presentation and Significant Accounting Policies

Organization

BPZ Resources, Inc., (together with its subsidiaries, collectively referred to as the “Company” or “BPZ” unless the context requires otherwise) a Texas corporation, is based in Houston, Texas with offices in Lima, Peru and Quito, Ecuador. The Company is focused on the exploration, development and production of oil and natural gas in Peru, and to a lesser extent, Ecuador. The Company also intends to utilize part of its planned future natural gas production as a supply source for the complementary development of a gas-fired power generation facility which is expected to be wholly- or partially-owned by the Company, or may be wholly-owned by a third party.

The Company maintains a subsidiary, BPZ Exploración & Producción S.R.L. (“BPZ E&P”), registered in Peru through its wholly-owned subsidiary, BPZ Energy, LLC, a Texas limited liability company, and its subsidiary, BPZ Energy International Holdings, L.P., a British Virgin Islands limited partnership. Currently, the Company, through BPZ E&P, has license contracts for oil and gas exploration and production covering a total of approximately 2.2 million gross (1.9 million net) acres, in four blocks in northwest Peru. The Company’s license contracts cover ownership of the following properties: 51% working interest in Block Z-1 (0.6 million gross acres), 100% working interest in Block XIX (0.5 million gross acres), 100% working interest in Block XXII (0.9 million gross acres) and 100% working interest in Block XXIII (0.2 million gross acres). The Block Z-1 contract was signed in November 2001, the Block XIX contract was signed in December 2003 and the Blocks XXII and XXIII contracts were signed in November 2007. Generally, according to the Organic Hydrocarbon Law No. 26221 and the regulations thereunder (the “Organic Hydrocarbon Law” or “Hydrocarbon Law”), the seven-year term for the exploration phase can be extended in each contract by up to an additional three years to a maximum of ten years. However, this exploration extension is subject to government approval and specific provisions of each license contract can vary the exploration phase of the contract as established by the Hydrocarbon Law. The license contracts require the Company to conduct specified activities in the respective blocks during each exploration period in the exploration phase. If the exploration activities are successful, the Company may decide to enter the exploitation phase and the total contract term can extend up to 30 years for oil production and up to 40 years for gas production. In the event a block contains both oil and gas, as is the case in the Company’s Block Z-1 contract, the 40-year term may apply to oil production as well. The Company’s estimate of proved reserves has been prepared under the assumption that the Company’s license contract will allow production for the possible 40-year term for both oil and gas.

Additionally, through its wholly-owned subsidiary, SMC Ecuador Inc., a Delaware corporation, and its registered branch in Ecuador, the Company owns a 10% non-operating net profits interest in an oil and gas producing property, Block 2, located in the southwest region of Ecuador (the “Santa Elena Property”). In May 2013, the license agreement and operating agreement covering the property were extended from May 2016 to December 2029.

The Company is in the process of developing its Peruvian oil and gas reserves.  The Company entered commercial production for Block Z-1 in November 2010 and produces and sells oil from the Corvina and Albacora fields under the Company’s current sales contracts. The Company completed the installation of the new CX-15 platform in the Corvina field to continue the development of the field. In July 2013 the Company spudded the first development well from the new CX-15 platform. The Company also spudded a development well from the A platform in the Albacora field of Block Z-1 in September 2013. The Company spudded an exploratory well in Block XXIII in January 2014.

On December 14, 2012, Perupetro S.A (“Perupetro”), a corporation owned by the Peruvian government empowered to become a party in the contracts for the exploration and/or exploitation of hydrocarbons in order to promote these activities in Peru, approved the terms of the amendment to the Block Z-1 License Contract to recognize the sale of a 49% participating interest (“closing”) in offshore Block Z-1 to Pacific Rubiales Energy Corp. (“Pacific Rubiales”). Under the terms of the agreements signed on April 27, 2012, the Company (together with its subsidiaries) formed an unincorporated joint venture with a Pacific Rubiales subsidiary, Pacific Stratus Energy S.A., to explore and develop the offshore Block Z-1 located in Peru. Pursuant to the agreements, Pacific Rubiales agreed to pay $150.0 million for a 49% participating interest, including reserves, 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 (“carry amount”) from the effective date of the Stock Purchase Agreement (“SPA”), January 1, 2012. On December 30, 2012, the Peruvian Government signed the Supreme Decree for the execution of the amendment to the Block Z-1 License Contract.

6

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements of BPZ Resources, Inc. and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP” or “U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The unaudited consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the interim periods presented on a basis consistent with the annual audited consolidated financial statements. All such adjustments are of a normal, recurring nature. All significant transactions between BPZ and its consolidated subsidiaries have been eliminated. Certain prior period amounts have been reclassified to conform to current year presentation. Results of operations for interim periods are not necessarily indicative of the results of operations that may be expected for the entire year. The balance sheet at December 31, 2013 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. These interim consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

Use of Estimates

The preparation of the consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP” or “U.S. GAAP”) requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses in the consolidated financial statements, and the disclosure of contingent assets and liabilities. Actual results could differ from these estimates.

Estimates of crude oil reserves are the most significant of the Company’s estimates. All of the reserves data in this Form 10-Q are estimates. Reservoir engineering is a subjective process of estimating underground accumulations of crude oil and natural gas. Numerous interpretations and assumptions are made in estimating quantities of proved crude oil and natural gas reserves. The accuracy of any reserves estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. As a result, reserves estimates may be different from the quantities of crude oil and natural gas that are ultimately recovered.

Other items subject to estimates and assumptions include the carrying amounts of property, plant and equipment, including impairments and asset retirement obligations, and deferred income tax assets. Management evaluates estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic and commodity price environment. Current credit market conditions combined with volatile commodity prices have resulted in increased uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined accurately, actual results could differ significantly from management’s estimates.

Reclassification 

Certain reclassifications have been made to the 2013 consolidated financial statements to conform to the 2014 presentation. These reclassifications were not material to the accompanying consolidated financial statements.

Summary of Significant Accounting Policies

The Company provided a summary discussion of significant accounting policies, estimates and judgments in Note-1 to the Notes to Consolidated Financial Statements included in its Annual Report on Form 10-K for the year ended December 31, 2013. These interim financial statements should be read in conjunction with the consolidated audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

Recent Accounting Pronouncements 

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. (“ASU”) 2014-08: Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (ASU 2014-08). ASU 2014-08 changes the criteria for reporting discontinued operations while enhancing disclosures in this area and is effective for annual and interim periods beginning after December 15, 2014. The Company is currently evaluating the provisions of ASU 2014-08 and assessing the impact, if any, it may have on its financial position and results of operations.

7

In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (ASU 2014-09), which creates Topic 606, Revenue from Contracts with Customers, and supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. In addition, ASU 2014-09 supersedes the cost guidance in Subtopic 605-35, Revenue Recognition—Construction-Type and Production-Type Contracts, and creates new Subtopic 340-40, Other Assets and Deferred Costs— Contracts with Customers. The core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Also, ASU 2014-09 requires enhanced financial statement disclosures over revenue recognition as part of the new accounting guidance. ASU 2014-09 is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures).The Company is currently evaluating the provisions of ASU 2014-09 and assessing the impact, if any, it may have on its financial position and results of operations.

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 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, including reserves, 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 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.

The development of Block Z-1 is subject to the terms and conditions of a Joint Operating Agreement with Pacific Rubiales that governs the legal, technical, and operating rights and obligations of the parties with respect to the operation of Block Z-1. Under the agreement, the Company is the operator and responsible for the administrative, regulatory, government and community related duties and Pacific Rubiales manages the technical and operating duties in Block Z-1. The Joint Operating Agreement will continue for the term of the License Contract and thereafter until all decommissioning obligations under the License Contract have been satisfied.

The June 30, 2014 and December 31, 2013 carry amounts were $45.6 million and $81.3 million, respectively.

At June 30, 2014 and December 31, 2013, the Company reflected $40.7 million and $23.9 million, respectively, as other current liabilities and zero and $16.8 million, respectively, as other non-current liabilities for exploratory expenditures related to Block Z-1 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.

8

Note 3 — Receivables, Accounts Payable and Accrued Liabilities

Accounts Receivable

Below is a summary of accounts receivable as of June 30, 2014 and December 31, 2013:

	June 30, 2014		December 31, 2013
	(in thousands)
Commodity sales	$	9,542	$	2,303
Accounts receivable - joint venture		6,877		12,230
Other		4,324		7,097
Accounts receivable	$	20,743	$	21,630

At June 30, 2014 and December 31, 2013, accounts receivable other consisted of $4.3 million and $7.0 million due to the Company from the Company’s joint venture partner for services and materials provided directly to the joint venture partner.

Income Taxes Receivable

The Company’s June 30, 2014 and December 31, 2013 income tax receivable amounts were $2.0 million and $2.1 million, respectively.

Value-Added Tax Receivable

Value-added tax (referred to as “IGV” in Peru) is generally imposed on goods and services at a rate of 18% effective March 2011 and 19% in previous periods.

The Company is recovering its IGV receivable with IGV payables associated with oil sales under the normal IGV recovery process.

Activity related to the Company’s value-added tax receivable for the six months ended June 30, 2014 and the year ended December 31, 2013 is as follows:

	June 30, 2014			December 31, 2013
	(in thousands)
Value-added tax receivable as of the beginning of the period	$	12,262		$	21,784
IGV accrued related to expenditures during period		4,048			12,722
IGV reduced related to sale of oil during period		(12,780	)		(22,244	)
Value-added tax receivable as of the end of the period	$	3,530		$	12,262
Current portion of value-added tax receivable as of the end of the period	$	1,494		$	10,490
Long-term portion of value-added tax receivable as of the end of the period	$	2,036		$	1,772

See Note-5, “Prepaid and Other Current Assets and Other Non-Current Assets” for further information on the long-term portion of the value-added tax receivable.

9

Accounts Payable and Accrued Liabilities

Below is a summary of accounts payable as of June 30, 2014 and December 31, 2013:

	June 30, 2014		December 31, 2013
	(in thousands)
Accounts payable - joint venture	$	719	$	-
Other accounts payable		1,924		3,127
Accounts payable	$	2,643	$	3,127

The June 30, 2014 and December 31, 2013 accrued liabilities amounts were $12.5 million and $11.2 million, respectively.

Note 4 — Inventory

Inventories consist of crude oil, tubular goods, accessories and spare parts for production equipment, stated at the lower of average cost or market.

The Company maintains crude oil inventories in storage vessels until the inventory quantities are at a sufficient level to make a delivery to the refinery in Talara.  Crude oil inventory is stated at the lower of average cost or market value. Cost is determined on a weighted average basis based on production costs.

Below is a summary of inventory as of June 30, 2014 and December 31, 2013:

	June 30, 2014		December 31, 2013
	(in thousands)
Tubular goods, accessories and spare parts	$	11,232	$	15,534
Crude oil		2,676		1,834
Inventory	$	13,908	$	17,368

	June 30, 2014		December 31, 2013
Crude oil (barrels)		42,124		24,866
Crude oil (cost per barrel)	$	63.54	$	73.77

Note 5 — Prepaid and Other Current Assets and Other Non-Current Assets

Below is a summary of prepaid and other current assets as of June 30, 2014 and December 31, 2013:

	June 30, 2014		December 31, 2013
	(in thousands)
Prepaid expenses and other	$	5,660	$	4,327
Prepaid insurance		705		1,092
Prepaid and other current assets	$	6,365	$	5,419

Prepaid expenses and other are related to prepayments for drilling services, equipment rental and material procurement and deposits that are rent deposits in connection with the Company’s offices in Houston and Peru. Prepaid insurance consists of premiums related to the Company’s operations as well as general liability and directors’ and officers’ insurance policies.

10

Below is a summary of other non-current assets as of June 30, 2014 and December 31, 2013:

	June 30,		December 31,
	2014		2013
	(in thousands)
Debt issue costs, net	$	2,598	$	3,293
Value-added tax receivable		2,036		1,772
Other non-current assets	$	4,634	$	5,065

Debt issue costs, net, consist of direct transaction costs incurred by the Company in connection with its debt raising efforts, less the amortization of the debt issuance costs to date.

In September 2013, the Company prepaid the remaining principal balance on the $40.0 million secured debt facility (which had been repaid by scheduled principal repayments to $36.0 million). In May 2013, the Company prepaid the remaining principal balance on the $75.0 million secured debt facility and amended and restated the $40.0 million secured debt facility (which had been repaid by scheduled principal repayments to $25.5 million) by increasing the facility size and borrowing an additional $14.5 million. The debt issue costs associated with those agreements were modified in accordance with ASC Topic 470 as follows:

(1) In May 2013, the Company prepaid the remaining principal balance on the $75.0 million secured debt facility and, accordingly, expensed the remaining $1.4 million of unamortized debt issue costs as part of the “Loss on extinguishment of debt.”

(2) In May 2013, the Company amended and restatement of the $40.0 million secured debt facility (which had been repaid by scheduled principal repayments to $25.5 million) associated with the increase in the facility size and borrowing of an additional $14.5 million, the Company added $1.8 million of debt issue costs incurred to the remaining unamortized debt issue costs of $0.6 million. The amendment and restatement was not considered a substantial modification of debt. The $2.4 million of debt issue costs was to be amortized to expense over the remaining term of the $40.0 million secured debt facility, ending in January 2015, using the effective interest method. In September 2013, the Company prepaid the remaining principal balance on the $40.0 million secured debt facility and, accordingly, expensed the remaining $1.7 million of unamortized debt issue costs as part of the “Loss on extinguishment of debt.”

The Company incurred $4.8 million of original debt issue costs in the first quarter of 2010 associated with the issuance of an aggregate principal amount of $170.9 million of convertible notes due 2015 (the “2015 Convertible Notes”). The debt issue costs are being amortized over the life of the 2015 Convertible Notes, using the effective interest method. As a result of the repurchase of $85.0 million aggregate principal amount of 2015 Convertible Notes during the third quarter of 2013, approximately $12.2 million of the repayment was considered a retirement of debt and approximately $0.1 million of unamortized debt issue costs were expensed. The remaining $72.8 million of the repayment was considered an exchange of debt and not deemed a substantial modification of debt. The remaining unamortized debt issue costs are being amortized over the remaining life of the 2015 Convertible Notes, using the effective interest method. In April 2014, $26.0 million of the aggregate principal amount of the 2015 Convertible Notes were exchanged for an additional $25.0 million aggregate principal amount of 2017 Convertible Notes in a private transaction. The $26.0 million of the exchange was considered a retirement of debt and approximately $0.3 million of unamortized debt issue costs were expensed as part of the “Loss on extinguishment of debt.” The remaining unamortized debt issue costs of $0.6 million are being amortized over the remaining life of the 2015 Convertible Notes, using the effective interest method.

The Company incurred $2.3 million of original debt issue costs in the third quarter of 2013 associated with the issuance of an aggregate principal amount of $143.8 million of convertible notes due 2017 (the “2017 Convertible Notes”).  In the second quarter of 2014, the Company incurred $0.3 million of debt issue costs associated with the issuance in the exchange of the aggregate principal amount of $25.0 million of 2017 Convertible Notes. The debt issue costs are being amortized over the life of the 2017 Convertible Notes, using the effective interest method.

11

The following table is the amount of debt issue costs amortized into interest expense for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
	(in thousands)
Amortization of debt issue costs	$	344	$	740	$	718	$	1,418
	$	344	$	740	$	718	$	1,418

For further information regarding the Company’s debt, see Note-10, “Debt Obligations.”

At June 30, 2014 and December 31, 2013, the Company classified $2.0 million and $1.8 million, respectively, of its value-added tax receivable balance as a long-term asset as it believed it would take longer than one year to receive the benefit of this portion of the value-added tax receivable. For further information see Note-3, “Receivables, Accounts Payable and Accrued Liabilities.”

Note 6 — Property, Equipment and Construction in Progress

Below is a summary of property, equipment and construction in progress as of June 30, 2014 and December 31, 2013:

	June 30, 2014			December 31, 2013
	(in thousands)
Construction in progress:
Power plant and related equipment	$	88,064		$	82,928
Platforms and wells		26,258			12,505
Pipelines and processing facilities		874			846
Other		583			556
Producing properties (successful efforts method of accounting)		141,307			140,937
Producing equipment		40,209			40,209
Barge and related equipment		53,969			53,969
Office equipment, leasehold improvements and vehicles		9,155			9,122
Accumulated depletion, depreciation and amortization		(135,613	)		(123,319	)
Property, equipment and construction in progress, net	$	224,806		$	217,753

The Company follows the “successful efforts” method of accounting for its costs of acquisition, exploration and development of oil and gas properties. Under this method, oil and gas lease acquisition costs and intangible drilling costs associated with exploration efforts that result in the discovery of proved reserves and costs associated with development drilling, whether or not successful, are capitalized when incurred. Capitalized costs of producing crude oil and natural gas properties, along with support equipment and facilities, are amortized to expense by the unit-of-production method based on proved developed crude oil reserves on a field-by-field basis. Certain costs of exploratory wells are capitalized pending determinations that proved reserves have been found. Exploratory well costs continue to be capitalized if the well has found a sufficient quantity of reserves to justify its completion as a producing well and the Company is making sufficient progress assessing the reserves and the economic and operating viability of the project. If the determination is dependent upon the results of planned additional wells and required capital expenditures to produce the reserves found, the drilling costs will be capitalized as long as sufficient reserves have been found to justify completion of the exploratory well and the additional wells are underway or planned. All costs related to unsuccessful exploratory wells are expensed when such wells are determined to be non-productive.

Exploratory well costs capitalized greater than one year after completion of drilling were $6.6 million as of June 30, 2014, and December 31, 2013. The exploratory well costs relate to the CX11-16X gas well that was drilled in 2007, which tested sufficient quantities of gas and is currently shut-in until such time as a market is established for selling the gas. The Company plans to use the gas from the CX11-16X well for its gas-to-power project. See Note-18, “Commitments and Contingencies” for further information on the gas-to-power project.

12

During the six months ended June 30, 2014, the Company incurred net capital expenditures of approximately $19.3 million associated with its development initiatives for the exploration and production of oil and natural gas reserves and the complementary development of gas-fired power generation of electricity for sale in Peru.

The capital expenditures added were approximately $13.3 million related to the exploration of Block XXIII, which included capitalized interest of $0.8 million, approximately $5.1 million of costs related to the power plant, which consisted of capitalized interest of $4.7 million, and other capital expenditures incurred of approximately $0.9 million, which included capitalized interest of $0.5 million.

The transfer of a 49% participating interest in Block Z-1 to Pacific Rubiales was effective on December 14, 2012. Pursuant to the carry agreement, Pacific Rubiales provided funding for 100% of capital expenditures for Block Z-1 of $69.9 million for the six months ended June 30, 2014. These gross capital expenditures include approximately $32.1 million related to the CX-15 development drilling program, approximately $31.0 million related to the development drilling program in Albacora and expenditures related to the CX-15 platform of approximately $0.9 million.

The following table is the amount of interest expense capitalized to construction in progress for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
	(in thousands)
Interest expense capitalized	$	3,080	$	2,372	$	5,950	$	4,991

Note 7 — Asset Retirement Obligation

An obligation was recorded for the future plug and abandonment of the oil wells in the Corvina and Albacora fields in Block Z-1, and the Pampa la Gallina well in Block XIX in accordance with the provisions of ASC Topic 410, “Asset Retirement and Environmental Obligations.” ASC 410-20 requires that an asset retirement obligation (“ARO”) associated with the retirement of a tangible, long-lived asset be recognized as a liability in the period in which it is incurred and becomes determinable. Under this method, when liabilities for dismantlement and abandonment costs, excluding salvage values, are initially recorded, the carrying amount of the related oil and natural gas properties is increased. The fair value of the ARO asset and liability is measured using expected future cash outflows discounted at the Company’s credit-adjusted risk-free interest rate. Accretion of the liability is recognized each period using the interest method of allocation, and the capitalized cost is depleted using the units of production method. Should either the estimated life or the estimated abandonment costs of a property change materially upon the Company’s periodic review, a new calculation is performed using the same methodology of taking the abandonment cost and inflating it forward to its abandonment date and then discounting it back to the present using the Company’s credit-adjusted-risk-free rate. The carrying value of the ARO is adjusted to the newly calculated value, with a corresponding offsetting adjustment to the asset retirement cost. Any negative adjustment in excess of asset retirement cost is reclassified to depreciation, depletion, and amortization expense.

Activity related to the Company’s ARO for the six months ended June 30, 2014 and the year ended December 31, 2013 is as follows:

	June 30, 2014		December 31, 2013
	(in thousands)
ARO as of the beginning of the period	$	1,564	$	2,708
Liabilities incurred during period		105		204
Accretion expense		61		238
Revisions in estimates during period		-		(1,586	)
ARO as of the end of the period	$	1,730	$	1,564

The 2013 revisions in estimates are due to the change in estimates of future costs and the shift in timing of cash flows associated with expected payment of the ARO liability.  As a revision to estimated costs in 2013, the present value of the liabilities was adjusted and, as a result, the Company adjusted both the liability and capitalized asset. Any negative adjustment in excess of asset retirement cost is reclassified to depreciation, depletion, and amortization expense.

13

Note 8 — Investment in Ecuador Property

The Company has a 10% non-operating net profits interest in the Santa Elena Property an oil and gas property in Ecuador. The Company accounts for this investment under the cost method and records its share of cash received as other income. Since the Company’s investment represents ownership of an oil and gas property, which is a depleting asset, the Company is amortizing the cost of the investment on a straight-line basis over the remaining term of the agreement, which expires in December 2029.

Below is a summary reflecting the Company’s income (loss) from the investment in the Ecuador property for the three and six months ended June 30, 2014 and 2013, respectively, and the investment in the Ecuador property at June 30, 2014 and December 31, 2013, respectively.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013
	(in thousands)
Distributions received from investment in Ecuador property	$	-		$	250		$	-		$	250
Amortization of investment in Ecuador property		(9	)		(34	)		(17	)		(81	)
Income (loss) from investment in Ecuador property, net	$	(9	)	$	216		$	(17	)	$	169

	June 30,		December 31,
	2014		2013
	(in thousands)
Investment in Ecuador property, net	$	517	$	534

In 2013, the Consortium, which includes the Company and three other partners, in order to extend the term of the contract from 2016 to 2029 agreed to additional work commitments to increase production in the Santa Elena field. The Company’s total share of this commitment over the remaining life of the contract is $3.8 million (the Company’s 10% non-operating net profits interest) which amount is due for the remainder of 2014 through 2028. This commitment is expected to be funded by cash on hand and cash generated from new production of the Consortium. If the Consortium does not have sufficient cash on hand, the Company may elect to make a cash contribution to the Consortium for its 10% share of the commitment. If the Company elects not to make its 10% share contribution of the commitment, it would lose its rights in the Consortium and the Contract at the Santa Elena field.

Note 9 — Restricted Cash and Performance Bonds

Below is a summary of restricted cash as of June 30, 2014 and December 31, 2013:

	June 30, 2014		December 31, 2013
	(in thousands)
Performance bonds totaling $5.7 million for properties in Peru	$	3,459	$	3,459
Performance obligations and commitments for the gas-to-power site		650		650
Secured letters of credit		-		250
$40.0 million secured debt facility		1,000		1,000
Unsecured performance bond totaling $0.1 million for office lease agreement		-		-
Restricted cash	$	5,109	$	5,359
Current portion of restricted cash as of the end of the period	$	1,000	$	1,250
Long-term portion of restricted cash as of the end of the period	$	4,109	$	4,109

14

The $75.0 million secured debt facility entered into by the Company in July 2011 required the Company to establish a $2.5 million debt service reserve account during the first 15 months the debt facility was outstanding.  After the first 15-month period, the Company was required to keep a balance in the debt service reserve account equal to the aggregate amount of principal and interest due on the next quarterly repayment date. The requirement was subsequently amended subject to the closing of the sale of a 49% participating interest in Block Z-1 to require the funding of the debt service reserve account related to the $75.0 million secured debt facility in the amount of outstanding principal. The remaining principal balance related to the $75.0 million secured debt facility was repaid in May 2013 utilizing the funds in the debt service reserve account related to this debt facility, bringing both the current and non-current balances to zero at June 30, 2014 and at December 31, 2013.

The $40.0 million secured debt facility entered into by the Company in January 2011 required the Company to establish a $2.0 million debt service reserve account during the first 18-month period and, thereafter, to maintain a balance in the debt service reserve account equal to the aggregate amount of principal and interest payment on the $40.0 million secured debt facility due on the succeeding principal repayment date. The requirement was amended subject to the closing of the sale of a 49% participating interest in Block Z-1 to increase the funding of the debt service reserve account related to the $40.0 million secured debt facility to the amount of outstanding principal. The requirement was subsequently changed when the Company amended and restated the $40.0 million secured debt facility in May 2013 for the Company to maintain a balance in the debt service reserve account equal to the aggregate amount of principal and interest payment on the $40.0 million secured debt facility due on the succeeding principal repayment date. The remaining principal balance related to the $40.0 million secured debt facility was repaid in September 2013 utilizing $3.8 million of funds from the debt service reserve account related to this debt facility. As a result of the repayment of the remaining principal balance in September 2013 of the $40.0 million secured debt facility, it was agreed that the restricted cash balance would remain at $1.0 million relating to the Performance Based Arranger Fee for the $75.0 million secured debt facility through July 2014. Therefore the restricted cash balance related to the current and non-current portion of the $40.0 million secured debt financing was $1.0 million and zero, respectively, at June 30, 2014. The restricted cash related to the current and non-current portion of the $40.0 million secured debt financing was $1.0 million and zero, respectively, at December 31, 2013. In July 2014 the $1.0 million was released to the Company and the debt service reserve account was terminated.

All of the performance and insurance bonds are issued by Peruvian banks and their terms are governed by the corresponding license contracts, customs laws, legal requirements or rental practices.

Note 10 — Debt Obligations

At June 30, 2014 and December 31, 2013, debt consisted of the following:

	June 30, 2014		December 31, 2013
	(in thousands)
Convertible Notes, 8.5%, due October 2017, net of discount of ($15.9) million at June 30, 2014 and ($18.3) million at December 31, 2013	$	152,787	$	125,416
Convertible Notes, 6.5%, due March 2015, net of discount of ($1.7) million at June 30, 2014 and ($4.4) million at December 31, 2013		58,169		81,523
		210,956		206,939
Less: Current maturity of long-term debt		58,169		-
Long-term debt, net	$	152,787	$	206,939

Convertible Notes due 2017

During the third quarter of 2013, the Company closed on an offering for an aggregate principal amount of $143.8 million of convertible notes due 2017, which includes the exercise of the underwriter’s option to purchase an additional $18.8 million of the 2017 Convertible Notes in addition to the original offering of $125.0 million. The 2017 Convertible Notes are the Company’s general senior unsecured obligations and rank equally in right of payment with all of the Company’s other existing and future senior unsecured indebtedness and rank senior in the right of payment to all of our existing and future subordinated debt.  The 2017 Convertible Notes are effectively subordinate to any secured indebtedness the Company may have to the extent of the value of the assets collateralizing such indebtedness.  The 2017 Convertible Notes are not guaranteed by the Company’s subsidiaries. In April 2014, $26.0 million of the aggregate principal amount of the 2015 Convertible Notes were exchanged for an additional $25.0 million aggregate principal amount of 2017 Convertible Notes in a private transaction. As a result, the Company has $168.7 million principal amount of 2017 Convertible Notes outstanding at June 30, 2014.

15

The interest rate on the 2017 Convertible Notesis 8.50% per year with interest payments due on April 1st and October 1st of each year.  The 2017 Convertible Notes mature with repayment of the $168.7 million principal amount (assuming no conversion) on October 1, 2017 (the “2017 Maturity Date”).

The conversion rate is 249.5866 shares per $1,000 principal amount (equal to an initial conversion price of approximately $4.0066 per share of common stock). Upon conversion, if conversion is elected by the noteholders, the Company must deliver, at its option, either (1) a number of shares of its common stock determined as set forth in the Indenture agreement dated September 24, 2013 (the “2013 Indenture”), (2) cash, or (3) a combination of cash and shares of its common stock.

Holders may convert their 2017 Convertible Notes at their option at any time prior to the close of business on the second business day immediately preceding the 2017 Maturity Date under any of the following circumstances:

(1) during any fiscal quarter (and only during such fiscal quarter) commencing after October 1, 2013, if the last reported sale price of the Company’s common stock is greater than or equal to 130% of the conversion price of the 2017 Convertible Notes for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter;

(2) prior to July 1, 2017, during the five business-day period after any ten consecutive trading-day period in which the trading price of $1,000 principal amount of the 2017 Convertible Notes for each trading day in the measurement period was less than 97% of the product of the last reported sale price of the Company’s common stock and the conversion rate on such trading day; or

(3) upon the occurrence of one of a specified number of corporate transactions.

Holders may also convert the 2017 Convertible Notes at their option at any time beginning on July 1, 2017, and ending at the close of business on the second business day immediately preceding the 2017 Maturity Date or may hold the 2017 Convertible Notes to maturity and be paid their outstanding principal in cash.

The Company may not redeem the 2017 Convertible Notes prior to the 2017 Maturity Date.

If the Company experiences any one of certain specified types of corporate transactions, holders may require the Company to purchase all or a portion of their 2017 Convertible Notes. Any repurchase of the 2017 Convertible Notes pursuant to these provisions will be for cash at a price equal to 100% of the principal amount of the notes to be purchased plus any accrued and unpaid interest to, but excluding, the purchase date.

The 2013 Indenture for the 2017 Convertible Notes contains customary terms and covenants and events of default, the occurrence and continuation of which could result in the acceleration of amounts due under the 2017 Convertible Notes.

Net proceeds from the sale of the 2017 Convertible Notes, after deducting the discounts and commissions and any offering expenses payable by the Company, were approximately $124.5 million.  The 2017 Convertible Notes were issued with a 10% discount or $14.4 million. The underwriter received commissions of approximately $4.3 million in connection with the sale and the Company incurred $0.6 million of direct expenses in connection with the offering.  The Company used the net proceeds for general corporate purposes, including funding its exploration and production efforts, other projects and to reduce or refinance its outstanding debt.

The Company accounts for the 2017 Convertible Notes in accordance with ASC Topic 470, “Debt”, as it pertains to accounting for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement). Under the accounting guidance, convertible debt instruments that may be settled entirely or partially in cash upon conversion are required to be separated into liability and equity components, with the liability component amount determined in a manner that reflects the issuer’s non-convertible debt borrowing rate. The value assigned to the liability component is determined by measuring the fair value of a similar liability that does not have an equity conversion feature. The value assigned to the equity component is determined by deducting the fair value of the liability component from the initial proceeds. The excess of the principal amount of the liability component over its carrying amount (the non-cash discount) is amortized to interest cost using the effective interest method over the term of the 2017 Convertible Notes. In addition, transaction costs incurred that directly relate to the issuance of convertible debt instruments must be allocated to the liability and equity components in proportion to the allocation of proceeds and accounted for as debt issuance costs and equity issuance costs, respectively.

16

The Company estimated its non-convertible borrowing rate at the date of issuance of the 2017 Convertible Notes to be 12.9%. The 12.9% non-convertible borrowing rate represented the borrowing rate of similar companies with the same credit quality as the Company and was obtained through a quote from the underwriter. Using the income method and discounting the principal and interest payments of the 2017 Convertible Notes using the 12.9% non-convertible borrowing rate, the Company estimated the fair value of the $143.8 million 2017 Convertible Notes to be approximately $124.5 million, with the discount being approximately $19.3 million. The discount of $19.3 million includes the 10% discount of $14.4 million and the value of the equity component of $4.9 million. The discount is being amortized as non-cash interest expense over the life of the 2017 Convertible Notes using the effective interest method. In addition, the Company allocated approximately $2.3 million of the $4.9 million of fees and commissions as debt issue costs that are being amortized as non-cash interest expense over the life of the notes using the effective interest method. Approximately $0.1 million of fees and commissions were treated as transaction costs associated with the equity component and the remaining $2.5 million was expensed to other expense under the caption “Other income (expense)” in the third quarter of 2013.

As a result of the exchange during the second quarter of 2014, the Company estimated its non-convertible borrowing rate at the date of issuance of the $25.0 million 2017 Convertible Notes to be 7.89%. The 7.89% non-convertible borrowing rate represented the borrowing rate of similar companies with the same credit quality as the Company and was obtained through a quote from a financial advisor. Using the income method and discounting the principal and interest payments of the 2017 Convertible Notes with the 7.89% non-convertible borrowing rate, the Company estimated the fair value of the $25.0 million 2017 Convertible Notes to be approximately $25.4 million, with the premium being approximately $0.4 million. The value of the equity component was estimated at $0.5 million. The premium is being amortized as non-cash interest expense over the life of the 2017 Convertible Notes using the effective interest method. In addition, approximately $0.3 million of fees were considered debt issue costs that are being amortized as a non-cash interest expense over the life of the notes using the effective interest method. The Company recognized a loss on this transaction of approximately $0.9 million and this loss was included in the “Loss on extinguishment of debt” in the consolidated statement of operations in the second quarter of 2014. For further information on debt issue costs see Note-5, “Prepaid and Other Current Assets and Other Non-Current Assets.”

The following table is the estimated remaining cash payments as of June 30, 2014, including interest payments related to the 2017 Convertible Notes, assuming no conversion (in thousands):

Year
2014	$	7,170
2015		14,340
2016		14,340
2017		183,051
Total estimated remaining cash payments related to the 2017 Convertible Notes	$	218,901

The Company evaluated the 2013 Indenture for the 2017 Convertible Notes for potential embedded derivatives, noting that the conversion feature and make-whole provisions did not meet the embedded derivative criteria as set forth in ASC Topic 815, “Derivatives and Hedging”. Therefore, no additional amounts have been recorded for those items.

As of June 30, 2014, the net amount of $152.8 million includes the $168.7 million of principal reduced by $15.9 million of the remaining unamortized discount. The remaining unamortized discount of $15.9 million will be amortized into interest expense, using the effective interest method, over the remaining life of the 2017 Convertible Notes, which mature in October 2017.  At June 30, 2014, using the conversion rate of 249.5866 shares per $1,000 principal amount of the 2017 Convertible Notes, if the $168.7 million of principal were converted into shares of common stock, the notes would convert into approximately 42.1 million shares of common stock.  As of June 30, 2014, there is no excess if-converted value to the holders of the 2017 Convertible Notes as the price of the Company’s common stock at June 30, 2014, $3.08 per share, is less than the conversion price.

The annual effective interest rate on the 2017 Convertible Notes, including the amortization of debt issue costs, is approximately 12.5%.

17

The following table is the amount of interest expense related to the 2017 Convertible Notes, disregarding capitalized interest considerations, for the three and six months ended June 30, 2014 and 2013, respectively:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
	(in thousands)
Interest expense related to the contractual interest coupon	$	3,530	$	-	$	6,585	$	-
Amortization of debt discount expense		994		-		1,953		-
Amortization of debt issue costs		157		-		292		-
Interest expense related to the 2017 Convertible Notes	$	4,681	$	-	$	8,830	$	-

Convertible Notes due 2015

During the first quarter of 2010, the Company closed on a private offering for an aggregate principal amount of $170.9 million of convertible notes due 2015. The 2015 Convertible Notes are the Company’s general senior unsecured obligations and rank equally in right of payment with all of the Company’s other existing and future senior unsecured indebtedness.  The 2015 Convertible Notes are subordinate to all of the Company’s secured indebtedness to the extent of the value of the assets collateralizing such indebtedness.  The 2015 Convertible Notes are not guaranteed by the Company’s subsidiaries. In September 2013, the Company repurchased $85.0 million of the aggregate principal amount of the $170.9 million 2015 Convertible Notes, leaving a principal balance of $85.9 million. In April 2014, $26.0 million of the aggregate principal amount of the 2015 Convertible Notes were exchanged for an additional $25.0 million aggregate principal amount of 2017 Convertible Notes in a private transaction. As a result, the Company has $59.9 million principal amount of 2015 Convertible Notes outstanding at June 30, 2014.

The interest rate on the 2015 Convertible Notesis 6.50% per year with interest payments due on March 1st and September 1st of each year.  The 2015 Convertible Notes mature with repayment of the remaining principal balance of $59.9 million (assuming no conversion) on March 1, 2015 (the “2015 Maturity Date”).

The initial conversion rate of 148.3856 shares per $1,000 principal amount (equal to an initial conversion price of approximately $6.74 per share of common stock) was adjusted on February 3, 2011 in accordance with the terms of the Indenture agreement dated February 8, 2010 (the “2010 Indenture”). As a result, the conversion rate and conversion price changed to 169.0082 shares per $1,000 principal amount and $5.9169 per share of common stock, respectively. Upon conversion, if conversion is elected by the noteholders, the Company must deliver, at its option, either (1) a number of shares of its common stock determined as set forth in the 2010 Indenture, (2) cash, or (3) a combination of cash and shares of its common stock.

Holders may convert their 2015 Convertible Notes at their option at any time prior to the close of business on the second business day immediately preceding the 2015 Maturity Date under any of the following circumstances:

(1) during any fiscal quarter (and only during such fiscal quarter) commencing after March 31, 2010, if the last reported sale price of the Company’s common stock is greater than or equal to 130% of the conversion price of the 2015 Convertible Notes for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter;

(2) prior to January 1, 2015, during the five business-day period after any ten consecutive trading-day period in which the trading price of $1,000 principal amount of the 2015 Convertible Notes for each trading day in the measurement period was less than 97% of the product of the last reported sale price of the Company’s common stock and the conversion rate on such trading day;

(3) if the 2015 Convertible Notes have been called for redemption; or

(4) upon the occurrence of one of a specified number of corporate transactions.

Holders may also convert the 2015 Convertible Notes at their option at any time beginning on February 1, 2015, and ending at the close of business on the second business day immediately preceding the 2015 Maturity Date or may hold the 2015 Convertible Notes to maturity and be paid their outstanding principal in cash.

As of February 3, 2013, the Company may redeem for cash all or a portion of the 2015 Convertible Notes at a redemption price of 100% of the principal amount of the notes to be redeemed plus any accrued and unpaid interest to, but not including, the redemption date, plus a “make-whole” payment if: (1) for at least 20 trading days in any consecutive 30 trading days ending within 5 trading days immediately before the date the Company mails the redemption notice, the “last reported sale price” of its common stock exceeded 175% of the conversion price in effect on that trading day, and (2) there is no continuing default with respect to the notes that has not been cured or waived on or before the redemption date.

18

If the Company experiences any one of certain specified types of corporate transactions, holders may require the Company to purchase all or a portion of their 2015 Convertible Notes. Any repurchase of the 2015 Convertible Notes pursuant to these provisions will be for cash at a price equal to 100% of the principal amount of the notes to be purchased plus any accrued and unpaid interest to, but excluding, the purchase date.

The 2010 Indenture for the 2015 Convertible Notes contains customary terms and covenants and events of default, the occurrence and continuation of which could result in the acceleration of amounts due under the 2015 Convertible Notes.

Net proceeds from the sale of the $170.9 million of 2015 Convertible Notes, after deducting the discounts and commissions and any offering expenses payable by the Company, were approximately $164.9 million.  The initial purchaser received commissions of approximately $5.5 million in connection with the sale and the Company incurred approximately $0.6 million of direct expenses in connection with the offering.  The Company used the net proceeds for general corporate purposes, including capital expenditures and working capital, reduction or refinancing of debt, and other corporate obligations.

The Company accounts for the 2015 Convertible Notes in accordance with ASC Topic 470, “Debt,” as it pertains to accounting for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement). Under the accounting guidance, convertible debt instruments that may be settled entirely or partially in cash upon conversion are required to be separated into liability and equity components, with the liability component amount determined in a manner that reflects the issuer’s non-convertible debt borrowing rate. The value assigned to the liability component is determined by measuring the fair value of a similar liability that does not have an equity conversion feature. The value assigned to the equity component is determined by deducting the fair value of the liability component from the initial proceeds. The excess of the principal amount of the liability component over its carrying amount (the non-cash discount) is amortized to interest cost using the effective interest method over the term of the 2015 Convertible Notes. In addition, transaction costs incurred that directly relate to the issuance of convertible debt instruments must be allocated to the liability and equity components in proportion to the allocation of proceeds and accounted for as debt issuance costs and equity issuance costs, respectively.

The Company estimated its non-convertible borrowing rate at the date of issuance of the 2015 Convertible Notes to be 12%. The 12% non-convertible borrowing rate represented the borrowing rate of similar companies with the same credit quality as the Company and was obtained through a quote from the initial purchaser. Using the income method and discounting the principal and interest payments of the 2015 Convertible Notes using the 12% non-convertible borrowing rate, the Company estimated the fair value of the $170.9 million 2015 Convertible Notes to be approximately $136.3 million with the discount being approximately $34.6 million. The discount is being amortized as non-cash interest expense over the life of the notes using the effective interest method. In addition, the Company allocated approximately $4.8 million of the $6.1 million of fees and commissions as debt issue costs that are being amortized as non-cash interest expense over the life of the 2015 Convertible Notes using the effective interest method. The remaining $1.3 million of fees and commissions were treated as transaction costs associated with the equity component. The net amount of the equity component was $33.3 million, which included the initial discount of $34.6 million reduced by $1.3 million of direct transaction costs.

In September 2013, the Company repurchased $85.0 million of aggregate principal amount of the 2015 Convertible Notes. As a result of the $85.0 million repurchase during the third quarter of 2013, approximately $12.2 million of the repayment was considered a retirement of debt and the remaining $72.8 million of the repayment was considered an exchange of debt and not deemed a substantial modification of debt. The $85.0 million of 2015 Convertible Notes were repurchased with an approximate discount of 10%. The Company recognized a gain on the retirement of the debt of approximately $0.2 million and this gain was included in the “Loss on extinguishment of debt” in the consolidated statement of operations in the third quarter of 2013. For further information on debt issue costs see Note-5, “Prepaid and Other Current Assets and Other Non-Current Assets.”

As a result of the exchange during the second quarter of 2014, the $26.0 million of aggregate principal amount of 2015 Convertible Notes exchanged was considered a retirement of debt and deemed a substantial modification of debt. The $26.0 million of 2015 Convertible Notes were exchanged with an approximate discount of 4%. The Company recognized a loss on the retirement of the debt of approximately $0.3 million and this loss was included in the “Loss on extinguishment of debt” in the consolidated statement of operations in the second quarter of 2014. For further information on debt issue costs see Note-5, “Prepaid and Other Current Assets and Other Non-Current Assets.”

19

The following table is the estimated remaining cash payments as of June 30, 2014, including interest payments related to the 2015 Convertible Notes, assuming no conversion (in thousands):

Year
2014	$	1,946
2015		61,837
Total estimated remaining cash payments related to the 2015 Convertible Notes	$	63,783

The Company evaluated the 2010 Indenture for the 2015 Convertible Notes for potential embedded derivatives, noting that the conversion feature and make-whole provisions did not meet the embedded derivative criteria as set forth in ASC Topic 815, “Derivatives and Hedging.” Therefore, no additional amounts have been recorded for those items.

As of June 30, 2014, the net amount of $58.2 million of 2015 Convertible Notes outstanding includes the $59.9 million of principal reduced by $1.7 million of the remaining unamortized discount. The remaining unamortized discount of $1.7 million will be amortized into interest expense, using the effective interest method, over the remaining life of the 2015 Convertible Notes, which mature in March 2015.  At June 30, 2014, using the conversion rate of 169.0082 shares per $1,000 principal amount of the 2015 Convertible Notes, if the $59.9 million of principal were converted into shares of common stock, the notes would convert into approximately 10.1 million shares of common stock.  As of June 30 2014, there is no excess if-converted value to the holders of the 2015 Convertible Notes as the price of the Company’s common stock at June 30, 2014, $3.08 per share, is less than the conversion price.

For the three and six months ended June 30, 2014, the annual effective interest rate on the 2015 Convertible Notes, including the amortization of debt issue costs, was approximately 12.0%.

The following table is the amount of interest expense related to the 2015 Convertible Notes, disregarding capitalized interest considerations, for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
	(in thousands)
Interest expense related to the contractual interest coupon	$	1,043	$	2,777	$	2,439	$	5,555
Amortization of debt discount expense		707		1,862		1,592		3,653
Amortization of debt issue costs		187		250		426		495
Interest expense related to the 2015 Convertible Notes	$	1,937	$	4,889	$	4,457	$	9,703

$75.0 Million Secured Debt Facility

On July 6, 2011, the Company and its subsidiaries entered into a credit agreement with Credit Suisse and other parties (collectively the “lenders”), whereby the lenders agreed to provide a $75.0 million secured debt facility in two loan tranches to the Company’s subsidiary, BPZ E&P. The full amount available under the $75.0 million secured debt facility was drawn down by the Company on July 7, 2011. In April 2012, the Company and the lenders amended the terms of the $75.0 million secured debt facility and in May 2012, the Company prepaid $40.0 million of the principal balance of the $75.0 million secured debt facility. In May 2013, the Company prepaid the remaining principal balance of the $75.0 million secured debt facility.

Proceeds from the $75.0 million secured debt facility were utilized to pay certain fees and expenses under the $75.0 million secured debt facility, to fund a debt service reserve account under the $75.0 million secured debt facility, to reimburse certain affiliates of BPZ E&P for up to $14.0 million of capital and exploratory expenditures incurred by them in connection with the development of Block Z-1 and up to $6.0 million of capital and exploratory expenditures incurred by them in connection with the development in Block XIX in northwest Peru, and to finance BPZ E&P’s capital and exploratory expenditures in connection with the development of Block Z-1.

As a result of the prepayment of the remaining principal balance during the second quarter of 2013, the Company incurred $2.4 million of fees and a prepayment premium. The $2.4 million in fees and prepayment premium were recognized as a “Loss on extinguishment of debt” in the Consolidated Statement of Operations in the second quarter of 2013. Approximately $1.4 million representing the remaining unamortized debt issue costs on the loan was expensed as a “Loss on extinguishment of debt” in the Consolidated Statement of Operations when the Company prepaid the remaining principal in the second quarter of 2013.

20

As a result of the prepayment and amendment during the second quarter of 2012, the Company incurred $5.8 million of fees and prepayment premium and $1.1 million of debt issue costs. The $5.8 million in fees and prepayment premium were recognized as a “Loss on extinguishment of debt” in the Consolidated Statement of Operations, of which 25% was paid at the time of the amendment and prepayment and 25% was paid at the time of each of the next three quarterly interest payment dates ending in January 2013.

The $75.0 million secured debt facility, as amended, provided for an ongoing fee through July 2014 payable by BPZ E&P to the lenders, of the Performance Based Arranger Fee whose amount is determined by the change in the price of Brent crude oil at inception of the loans and the price at each principal repayment date in accordance with the original loan principal repayment dates, subject to a 12% ceiling of the original principal amount borrowed. For further information on the Performance Based Arranger Fee, see Note-11, “Derivative Financial Instruments” and Note-13, “Fair Value Measurements and Disclosures.”

$40.0 Million Secured Debt Facility

In January 2011, the Company, through its subsidiaries, completed a credit agreement with Credit Suisse whereby Credit Suisse provided a $40.0 million secured debt facility to the Company’s power generation subsidiary, Empresa Eléctrica Nueva Esperanza S.R.L. On April 27, 2012, the Company and its subsidiaries, Empresa Eléctrica Nueva Esperanza S.R.L. and BPZ E&P, entered into a fourth amendment to the $40.0 million secured debt facility with Credit Suisse. In May 2013, the Company amended and restated the $40.0 million secured debt facility (which had been repaid by scheduled principal repayments to $25.5 million) by increasing the facility size and borrowing an additional $14.5 million. In September 2013, the Company prepaid the remaining principal balance of the $40.0 million secured debt facility.    

In 2013, the $14.5 million of proceeds from the amended and restated $40.0 million secured debt facility was utilized to meet the Company’s 2013 capital, exploration and development work programs as well as for general corporate purposes. In 2011, the proceeds from the $40.0 million secured debt facility were utilized to meet the Company’s 2011 capital, exploration and development work programs, and to reduce other debt obligations.

In May 2013, as a result of amending and restating the $40.0 million secured debt facility (which had been repaid by scheduled principal repayments to $25.5 million) to increase the facility size and borrowing an additional $14.5 million, the Company added $1.8 million of debt issue costs. The $1.8 million of new debt issue costs was combined with the remaining $0.6 million of unamortized debt issue costs and was originally planned to be amortized over the remaining term, ending in January 2015, using the effective interest method.

As a result of the prepayment of the remaining principal balance during the third quarter of 2013, the Company incurred $2.0 million in fees and prepayment premium. The $2.0 million in fees and prepayment premium were recognized as a “Loss on extinguishment of debt” in the Consolidated Statement of Operations in the third quarter of 2013. Approximately $1.7 million representing the remaining unamortized debt issue costs on the loan was expensed as a “Loss on extinguishment of debt” in the Consolidated Statement of Operations when the Company prepaid the remaining principal in the third quarter of 2013.

The $40.0 million secured debt facility, as amended, provided for ongoing fees through July 2013 payable to Credit Suisse including a Performance Based Arranger Fee whose amount is determined by the change in the price of Brent crude oil at inception of the loan and the price at each principal repayment date in accordance with the original loan principal repayment dates, subject to a 18% ceiling of the original principal amount borrowed. For further information on the Performance Based Arranger Fee, see Note-11, “Derivative Financial Instruments” and Note-13, “Fair Value Measurements and Disclosures.” 

21

Interest Expense

The following table is a summary of interest expense for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013
	(in thousands)
Interest expense	$	6,593		$	6,652		$	13,300		$	13,569
Capitalized interest expense		(3,080	)		(2,372	)		(5,950	)		(4,991	)
Interest expense, net	$	3,513		$	4,280		$	7,350		$	8,578

Note 11 — Derivative Financial Instruments

Objective and Strategies for Using Derivative Instruments:

In connection with the $40.0 million secured debt facility through July 2013 and the $75.0 million secured debt facility through July 2014, the Company and Credit Suisse agreed that a portion of the arranger fee would be based on the performance for oil prices and be payable at each of the principal repayment dates.  The fee is calculated by multiplying the principal payment amount by the change in oil prices from the loan origination date and the oil price at each principal repayment date. Additionally, the fee is capped at 18% of the $40.0 million secured debt facility and 12% of the $75.0 million secured debt facility. The Performance Based Arranger Fee is being accounted for as an embedded financing derivative under ASC Topic 815, “Derivatives and Hedging” and, accordingly, is being recorded at fair value with any changes in value reflected as a gain or loss on derivatives in the accompanying Consolidated Statements of Operations. The following table sets forth a reconciliation of the changes in fair value of the Company’s derivative financial instruments for the six months ended June 30, 2014 and the year ended December 31, 2013:

Derivative Financial Instruments Not Designated as Hedging Instruments

	2014		2013
	(in thousands)
Beginning fair value of derivatives	$	30	$	2,984
(Gain) loss on derivatives		239		(242	)
Cash settlements paid		-		(2,712	)
Ending fair value of derivatives	$	269	$	30

See Note-13, “Fair Value Measurements and Disclosures” for a discussion of methods and assumptions used to estimate the fair values of the Company’s derivative instruments.

Note 12 — Stockholders’ Equity

The Company has 25,000,000 shares of preferred stock, no par value, and 250,000,000 shares of common stock, no par value, authorized for issuance.

22

Potentially Dilutive Securities

Basic earnings (loss) per share of common stock is computed using the weighted average number of shares of common stock outstanding during each period. The diluted earnings (loss) per share of common stock may include the effect of the Company’s shares issuable under convertible debt agreements, outstanding stock options, shares of restricted stock or performance stock units, except in periods in which there is a net loss. The following table summarizes the calculation of basic and diluted earnings (loss) per share:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013
	(in thousands, except per share data)
Net loss	$	(2,549	)	$	(19,640	)	$	(6,119	)	$	(32,424	)
Shares:
Basic weighted average common shares outstanding		116,342			115,935			116,193			115,862
Incremental shares from assumed conversion of dilutive share based awards		-			-			-			-
Diluted weighted average common shares outstanding		116,342			115,935			116,193			115,862
Excluded share based awards (1) (2)		8,480			8,140			8,480			8,140
Excluded 2017 convertible debt shares (1)		42,108			-			42,108			-
Excluded 2015 convertible debt shares (1)		10,122			28,890			10,122			28,890
Basic net loss per share	$	(0.02	)	$	(0.17	)	$	(0.05	)	$	(0.28	)
Diluted net loss per share	$	(0.02	)	$	(0.17	)	$	(0.05	)	$	(0.28	)

(1) Inclusion of the shares for these awards would have had an antidilutive effect.

(2) Inclusion of the performance share units for these awards would have had

an antidilutive effect. The actual number of performance share units earned may

range from 0% to 200%.

The following table summarizes stock-based compensation costs recognized under ASC Topic 718, “Stock Compensation,” for the three and six months ended June 30, 2014 and 2013, respectively, which are included in “General and administrative expense” on the Consolidated Statements of Operations:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
	(in thousands)
Employee stock—based compensation costs	$	565	$	763	$	1,204	$	1,304
Director stock—based compensation costs		176		155		369		293
Employee stock purchase plan costs		2		3		4		6
	$	743	$	921	$	1,577	$	1,603

Stock Option, Restricted Stock and Performance Share Plans

The Company has in effect the 2007 Long-Term Incentive Compensation Plan, as amended in 2010 and 2014 to increase the number of shares available (the “2007 LTIP”), and the 2007 Directors’ Compensation Incentive Plan (the “Directors’ Plan”). The 2007 LTIP and Directors’ Plan provide for awards of options, stock appreciation rights, restricted stock, restricted stock units, performance awards, other stock-based awards and cash-based awards to any of the Company’s officers, employees, consultants and the employees of certain of the Company’s affiliates, as well as non-employee directors. The number of shares authorized under the amended 2007 LTIP and Directors’ Plan is 12.0 million and 4.0 million, respectively, which includes an additional 4.0 million shares related to the 2007 LTIP and 1.5 million shares related to the Directors’ Plan approved by the Company’s shareholders on June 20, 2014. As of June 30, 2014, approximately 4.4 million shares remain available for future grants under the 2007 LTIP and 1.8 million shares remain available for future grants under the Directors’ Plan.

23

Restricted Stock Awards and Performance Stock Units

Restricted Stock

On February 20, 2014, the Company’s Board of Directors awarded 724,389 shares of restricted stock to officers and other key employees under the Company’s 2007 LTIP. The restricted stock awards generally vest on the second anniversary of the grant date, or may vest equally over three years of the grant date. For the six months ended June 30, 2014, the weighted average grant date fair value per share of the restricted stock granted was $2.16.

On February 20, 2014, the Company awarded its non-employee directors a total of 347,220 shares of restricted stock under the Directors’ Plan. The restricted stock awards generally vest on the second anniversary of the grant date. For the six months ended June 30, 2014, the weighted average grant date fair value per share of the restricted stock granted was $2.16.

Performance Stock Units

On February 20, 2014, the Company’s Board of Directors awarded 225,695 shares of performance stock units, which are referred to by the Company as Relative Performance Stock Units, to officers under the Company’s 2007 LTIP. Shares of the Company's common stock will be issued following the vesting of the Relative Performance Stock Units determined based on the level of achievement of the performance measure at the end of the performance period (from January 1, 2014 through December 31, 2016).  The actual number of shares of Company common stock to be issued at payment is measured on a three-year cumulative stock price basis relative to a selected peer group and can range from a minimum of 0% of the number of shares of Company common stock granted to a maximum of 200% of the number of shares of Company common stock granted.

Compensation expense associated with these Relative Performance Stock Units is based on the grant date fair value of a single Relative Performance Stock Unit as determined using a Monte Carlo simulation model.  As the Company intends to settle these Relative Performance Stock Units with shares of the Company’s common stock at the end of the performance period, the Relative Performance Stock Unit awards are accounted for as equity awards and the expense is calculated on the grant date and amortized over the life of the Relative Performance Stock Unit awards. The grant date fair value per share of the Relative Performance Stock Unit award granted was $2.12.

In addition, on February 20, 2014, the Company’s Board of Directors awarded 225,694 shares of performance stock units, which are referred to by the Company as Absolute Performance Stock Units, to officers under the Company’s 2007 LTIP. Shares of the Company's common stock will be issued following the vesting of the Absolute Performance Stock Units determined based on the level of achievement of the performance measure at the end of the performance period (from January 1, 2014 through December 31, 2016).  The actual number of shares of the Company common stock to be issued at payment is measured on a three-year cumulative stock price basis relative to pre-established stock price goals and can range from a minimum of 0% of the number of shares of Company common stock granted to a maximum of 200% of the number of shares of Company common stock granted.

Compensation expense associated with these Absolute Performance Stock Units is based on the grant date fair value of a single Absolute Performance Stock Unit as determined using a Monte Carlo simulation model.  As the Company intends to settle these Absolute Performance Stock Units with shares of the Company’s common stock at the end of the performance period, the Absolute Performance Stock Unit awards are accounted for as equity awards and the expense is calculated on the grant date and amortized over the life of the Absolute Performance Stock Unit awards. The grant date fair value per share of the Absolute Performance Stock Unit award granted was $0.80.

Stock Options

Incentive and non-qualified stock options issued to directors, officers, employees and consultants are typically granted at the fair market value on the date of grant. The Company’s stock options generally vest in equal annual installments over a two to three year period and expire ten years from the date of grant. There have been no stock options awarded in 2014.

24

Employee Stock Purchase Plan

The employee stock purchase plan, which was approved by the shareholders on June 24, 2011, provides eligible employees the opportunity to acquire shares of BPZ Resources, Inc. common stock at a discount through payroll deductions. Employees are allowed to purchase up to 2,500 shares in any one offering period (not longer than twenty-seven months), within IRS limitations and plan rules. The offering period means each period of time which common stock is offered to participants. Unless otherwise determined by the Compensation Committee, a new offering period shall commence on the first day of each calendar quarter. Generally, the purchase price for stock acquired under the plan is the lower of 85% (subject to Compensation Committee adjustment) of the fair market value of the common stock on the grant date or the fair market value of the common stock on the investment date. Under this plan, 2,000,000 common shares were reserved for issuance and purchase by eligible employees. Activity under this plan began in the first quarter of 2012. At June 30, 2014, 1,921,470 shares were available for issuance. On July 1, 2014, 3,958 shares were issued to employees at a price of $2.62 per share.    

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 associated with the Company’s long-term assets, short-term debt and long-term debt. 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 (through July 2013), the $75.0 million secured debt facility (through July 2014) 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.”

25

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

		Fair Value Measurements Using:
		Quoted		Significant
		Prices in		Other		Significant
		Active		Observable		Unobservable
	Balance Sheet	Markets		Inputs		Inputs
	Location	(Level 1)		(Level 2)		(Level 3)
		(in thousands)
June 30, 2014
Financial Liabilities
Derivative Financial Instruments
	Current Liabilities	$	-	$	269	$	-
	Non-current Liabilities		-		-		-
		$	-	$	269	$	-
December 31, 2013
Financial Liabilities
Derivative Financial Instruments
	Current Liabilities	$	-	$	30	$	-
	Non-current Liabilities		-		-		-
		$	-	$	30	$	-

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 and liabilities were impaired as of June 30, 2014 and December 31, 2013, 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

Debt with Fixed Interest Rates

The fair value information regarding the Company’s fixed rate debt at June 30, 2014 and December 31, 2013 is as follows:

	June 30, 2014				December 31, 2013
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(in thousands)				(in thousands)
Convertible Notes, 8.5%, due October 2017, net of discount of ($15.9) million at June 30, 2014 and ($18.3) million at December 31, 2013 (1)	$	152,787	$	202,076	$	125,416	$	130,094
Convertible Notes, 6.5%, due March 2015, net of discount of ($1.7) million at June 30, 2014 and ($4.4) million at December 31, 2013 (2)		58,169		60,684		81,523		79,663

(1) The Company estimated the fair value of the 2017 Convertible Notes to be approximately $202.1 million and $130.1 million at June 30, 2014 and December 31, 2013, respectively, based on observed market prices for the same or similar types of debt issues. The fair value of the 2017 Convertible Notes is considered to be a Level 1 measurement on the fair value hierarchy.

(2) The Company estimated the fair value of the 2015 Convertible Notes to be approximately $60.7 million and $79.7 million at June 30, 2014 and December 31, 2013, respectively, based on observed market prices for the same or similar types of debt issues. The fair value of the 2015 Convertible Notes is considered to be a Level 1 measurement on the fair value hierarchy.

26

Note 14 — Revenue

The oil produced is delivered by vessel to the refinery owned by the Peruvian national oil company, Petroleos del Peru - PETROPERU S.A. (“Petroperu”), in Talara, located approximately 70 miles south of the platforms.  Produced oil is kept in production inventory until inventory quantities are at a sufficient level to make a delivery to the refinery in Talara.  Although all of the Company’s oil sales are to Petroperu, it believes the loss of Petroperu as its sole customer would not materially impact the Company’s business because it could readily find other purchasers for its oil production both in Peru and throughout the world.

The Company’s revenues are reported net of royalties owed to the government of Peru. Royalties are assessed by Perupetro, as stipulated in the Block Z-1 License Contract based on production.

The following table is the amount of royalty costs related to gross revenues for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
	(in thousands)
Royalty costs	$	1,383	$	697	$	2,554	$	1,403
	$	1,383	$	697	$	2,554	$	1,403

Note 15 — Standby Costs

For the three and six months ended June 30, 2014, the Company incurred no standby costs.

For the three and six months ended June 30, 2013, the Company incurred $2.3 million and $3.4 million, respectively, of standby costs. During the three months ended June 30, 2013, the Company had Petrex-28 rig either partially of fully on standby for three months. During the six months ended June 30, 2013, the Company had the Petrex-10 rig partially or fully on standby for approximately two months and the Petrex-28 rig partially or fully on standby for approximately five months.

Note 16 — Income Tax

The following is a summary of income (loss) before income taxes and income tax expense (benefit) for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013
	(in thousands)
Income (loss) before income taxes:
United States	$	(4,882	)	$	(5,543	)	$	(9,943	)	$	(9,193	)
Foreign		4,458			(14,474	)		7,899			(23,278	)
	$	(424	)	$	(20,017	)	$	(2,044	)	$	(32,471	)

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2014		2013			2014		2013
	(in thousands)
Income tax expense (benefit):
United States	$	-	$	(322	)	$	-	$	668
Foreign		2,125		(55	)		4,075		(715	)
	$	2,125	$	(377	)	$	4,075	$	(47	)

The Company has recognized a gross deferred tax asset related to net operating loss carryforwards attributable to the United States, before application of the valuation allowances. The Company has a valuation allowance for the full amount of the domestic net deferred tax asset, as it believes, based on the weight of available evidence, that it is more likely than not that the deferred tax asset will not be realized prior to the expiration of net operating loss carryforwards in various amounts through 2033. Furthermore, because the Company has no operations within the U.S. taxing jurisdiction, it is likely that sufficient generation of revenue to offset the Company’s deferred tax asset is remote.

27

The difference from the 22% statutory rate provided for under the Block Z-1 License Contract is due to other Peruvian operations that have a different statutory tax rate, certain expenses which are not deductible in Peru and a change in the timing of when certain expenses are deductible.

The June 30, 2014 and December 31, 2013 balance of unrecognized tax benefits includes $0.7 million that, if recognized, would impact the Corporation’s effective income tax rate. Over the next 12 months, the Company does not anticipate any reduction in the balance. The Company had accrued interest and penalties related to unrecognized tax benefits of $46,000 at both June 30, 2014 and December 31, 2013. Estimated interest and penalties related to potential underpayment on unrecognized tax benefits, if any, are classified as a component of income tax expense in the Consolidated Statement of Operations.

Note 17 — Business Segment Information

The Company determines and discloses its segments in accordance with ASC Topic 280, “Segment Reporting” (“ASC Topic 280”), which uses a “management” approach for determining segments. The management approach designates the internal organization that is used by management for making operating decisions and assessing performance as the source of the Company’s reportable segments. ASC Topic 280 also requires disclosures about products or services, geographic areas, and major customers. The Company’s management reporting structure provided for only one segment for the three and six months ended June 30, 2014 and 2013, respectively. Accordingly, no separate segment information is presented. In addition, the Company operates only in Peru and has only one customer for its oil production, Petroperu. The majority of the Company’s long-lived assets are located in Peru. Management does not consider its investment in Ecuador as a separate business segment.

Note 18 — Commitments and Contingencies

Profit Sharing

The Constitution of Peru and Legislative Decree Nos. 677 and 892 give employees working in private companies engaged in activities generating income as defined by the Income Tax Law, the right to share in the company’s profits.  According to Article 3 of the United Nations International Standard Industrial Classification, BPZ E&P’s tax category is classified under the “mining companies” section, which sets the profit sharing rate at 8%. However, in Peru, the Hydrocarbon Law states, and the Supreme Court ruled, that hydrocarbons are not related to mining activities. Hydrocarbons are included under “Companies Performing Other Activities,” thus Oil and Gas Companies pay profit sharing at a rate of 5%. The 5% of income is determined by calculating a percentage of the Company’s Peruvian subsidiaries’ annual total revenues subject to income tax less the expenses required to produce revenue or maintain the source of revenues. The benefit granted by the law to employees is calculated on the basis of “income subject to taxation” per the Peruvian tax code, and not based on income (loss) before income taxes as reported under GAAP. For the three and six months ended June 30, 2014 and 2013, respectively, profit sharing expense was not material to the Company as the Company’s Peruvian subsidiaries did not have a material amount of “income subject to taxation” per the Peruvian tax code as a result of declaring commercial production in the Corvina field,which allowedcertain exploration and development costs to be deductible in 2014 and 2013 that were not deductible in previous years.  The Company is subject to profit sharing expense in any year its Peruvian subsidiaries are profitable according to the Peruvian tax laws.

Gas-to-Power Project Financing

The gas-to-power project entails the planned installation of approximately 10 miles of gas pipeline from the CX-11 platform to shore, the construction of gas processing facilities and the building of an approximately 135 megawatt (“MW”) simple-cycle electric generating plant.  The power plant site is located adjacent to an existing substation and power transmission lines, which are capable of handling up to 420 MW of power. The existing substation and transmission lines are owned and operated by third parties.

The Company currently estimates the gas-to-power project will cost approximately $153.5 million, excluding capitalized interest, working capital and 18% value-added tax which will be recovered via future revenue billings. The $153.5 million includes $133.5 million for the estimated cost of the power plant and $20.0 million for the natural gas pipeline. While the Company has held initial discussions with several potential joint venture partners for the gas-to-power project in an attempt to secure additional financing and other resources for the project, the Company has not entered into any definitive agreements with a potential partner. In the event the Company is able to identify and reach an agreement with a potential joint venture partner, it may only retain a minority position in the project, or the power generation facility may be wholly owned by a third party. However, the Company, along with its Block Z-1 partner, Pacific Rubiales, expects to retain the responsibility for the construction of the pipeline as well as retain ownership of the pipeline. The Company has obtained certain permits and is in the process of obtaining additional permits to proceed with the project.

28

Santa Elena Field

In 2013, the Consortium, which includes the Company and three other partners, in order to extend the term of the contract from 2016 to 2029, agreed to additional work commitments to increase production in the Santa Elena field. The Company’s total share of this commitment over the remaining life of the contract is $3.8 million (the Company’s 10% non-operating net profits interest) which amount is due for the remainder of 2014 to 2028. This commitment is expected to be funded by cash on hand and cash generated from new production of the Consortium. If the Consortium does not have sufficient cash on hand, the Company may elect to make a cash contribution to the Consortium for its 10% share of the commitment. If the Company elects not to make its 10% share contribution of the commitment, it would lose its rights in the Consortium and the Contract at the Santa Elena field.

Note 19 — Legal Proceedings

From time to time, the Company may become a party to various legal proceedings arising in the ordinary course of business. While the outcome of lawsuits cannot be predicted with certainty, the Company is not currently a party to any proceeding that it believes could have a potentially material adverse effect on its financial condition, results of operations or cash flows.

Additionally, the Company is subject to numerous laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. To the extent laws are enacted or other governmental action is taken that restricts drilling or imposes environmental protection requirements that result in increased costs to the oil and natural gas industry in general, the business and prospects of the Company could be adversely affected.

29

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

You should read the following discussion and analysis together with our consolidated financial statements and notes thereto and the discussion contained in Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” Item 7A., “Quantitative and Qualitative Disclosures About Market Risk,” and Item 1A., “Risk Factors,” included in our Annual Report on Form 10-K for the year ended December 31, 2013.

 The following information contains forward-looking statements that involve risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, our actual results may differ from those expressed or implied by the forward-looking statements. See “Disclosure Regarding Forward-Looking Statements” below. Also, see “Cautionary Statement Regarding Certain Information Releases” below for material related to the release of certain information.

BPZ Resources, Inc., a Texas corporation, is based in Houston, Texas with offices in Lima, Peru and Quito, Ecuador. We are focused on the exploration, development and production of oil and natural gas in Peru and, to a lesser extent Ecuador. We also intend to utilize part of our planned future natural gas production as a supply source for the complementary development of a gas-fired power generation facility in Peru which we expect to wholly- or partially-own, or may be wholly-owned by a third party.

We maintain a subsidiary, BPZ Exploración & Producción S.R.L. (“BPZ E&P”), registered in Peru through our wholly-owned subsidiary BPZ Energy International Holdings, L.P., a British Virgin Islands limited partnership, and its subsidiary BPZ Energy, LLC, a Texas limited liability company. Currently, we, through BPZ E&P, have license contracts for oil and gas exploration and production covering a total of approximately 2.2 million gross (1.9 million net) acres in four blocks in northwest Peru. Our license contracts cover ownership of the following properties: 51% working interest in Block Z-1 (0.6 million gross acres), 100% working interest in Block XIX (0.5 million gross acres), 100% working interest in Block XXII (0.9 million gross acres) and 100% working interest in Block XXIII (0.2 million gross acres). The Block Z-1 contract was signed in November 2001, the Block XIX contract was signed in December 2003 and the Blocks XXII and XXIII contracts were signed in November 2007. Generally, according to the Organic Hydrocarbon Law No. 26221 and the regulations thereunder (the “Organic Hydrocarbon Law” or “Hydrocarbon Law”), the seven-year term for the exploration phase can be extended in each contract by an additional three years up to a maximum of ten years. However, this exploration extension is subject to government approval and specific provisions of each license contract can vary the exploration phase of the contract as established by the Hydrocarbon Law. The license contracts require us to conduct specified activities in the respective blocks during each exploration period in the exploration phase. If the exploration activities are successful, we may decide to enter the exploitation phase and our total contract term can extend up to 30 years for oil production and up to 40 years for gas production. In the event a block contains both oil and gas, as is the case in our Block Z-1, the 40-year term may apply to oil production as well. Our estimate of proved reserves has been prepared under the assumption that our license contract will allow production for the possible 40-year term for both oil and gas.

Additionally, through our wholly-owned subsidiary, SMC Ecuador Inc., a Delaware corporation, and its registered branch in Ecuador, we own a 10% non-operating net profits interest in an oil and gas producing property, Block 2, located in the southwest region of Ecuador (the “Santa Elena Property”). In May 2013, the license agreement and operating agreement covering the property were extended from May 2016 through December 2029.

We are in the process of developing our Peruvian oil and gas reserves. We entered commercial production for Block Z-1 in November 2010 and produce and sell oil from the Corvina and Albacora fields under our current sales contracts. We completed the installation of the new CX-15 platform in the Corvina field to continue the development of the field. In July 2013 we spudded the first development well from the new CX-15 platform. We also spudded a development well from the A platform in the Albacora field of Block Z-1 in September 2013. We spudded an exploratory well in Block XXIII in January 2014.

From the time we began producing from the Corvina field in November 2007 and the Albacora field in December 2009, through June 30, 2014, the two fields have produced approximately 6.9 MMBbls (100% gross and net through December 14, 2012 and 51% net participating interest thereafter) of oil.

On December 14, 2012 Perupetro S.A. (“Perupetro”), a corporation owned by the Peruvian government empowered to become a party in the contracts for the exploration and/or exploitation of hydrocarbons in order to promote these activities in Peru, approved the terms of the amendment to the Block Z-1 License Contract to recognize the sale of a 49% participating interest (“closing”) in offshore Block Z-1 to Pacific Rubiales Energy Corp. (“Pacific Rubiales”). Under terms of the agreements signed on April 27, 2012, we (together with our subsidiaries) formed an unincorporated joint venture with a Pacific Rubiales subsidiary, Pacific Stratus Energy S.A., to explore and develop the offshore Block Z-1 located in Peru. Pursuant to the agreements, Pacific Rubiales agreed to pay $150.0 million for a 49% participating interest, including reserves, in Block Z-1 and agreed to fund $185.0 million of our share of capital and exploratory expenditures in Block Z-1 (“carry amount”) from the effective date of the Stock Purchase Agreement (“SPA”), January 1, 2012. On December 30, 2012, the Peruvian Government signed the Supreme Decree for the execution of the amendment to the Block Z-1 License Contract.

30

At December 31, 2013, we had estimated net proved oil reserves of 16.1 MMBbls, of which 12.7 MMBbls were in the Corvina field and 3.4 MMBbls were from the Albacora field. Both fields are located in Block Z-1 offshore of northwest Peru.  Of our total proved reserves, 3.2 MMBbls (19.9%) are classified as proved developed reserves, which includes both proved developed producing and proved developed non-producing reserves from 11 gross (5.6 net) wells, and 12.9 MMBbls (80.1%) are classified as proved undeveloped reserves. The process of estimating oil and natural gas reserves is complex and requires many interpretations of available data and assumptions that may turn out to be inaccurate. 

Our current activities and related planning are focused on the following objectives:

● Continuing the offshore development drilling campaign from the new Corvina CX-15 platform and Albacora platform;

● Optimizing oil production in the Corvina and Albacora fields in Block Z-1 with our joint venture partner Pacific Rubiales;

● Processing and analyzing the data from the 3-D seismic survey in Block Z-1 to guide further exploration and development activities within the Block;

● Explore the remainder of Block Z-1, starting with the Delfin prospect where we have received the permit to install a platform and begin exploratory drilling;

● Continuing acquisition, processing and interpretation of seismic data to better understand the characteristics and potential of our onshore properties;

● Executing an exploratory drilling campaign in Block XXIII;

● Planning and permitting an on-shore drilling campaign to explore and appraise Block XXII and meet our applicable license requirements;

● Identifying potential partners for our other operations; and

● Continuing business development efforts for our gas-to-power project to monetize our natural gas resources, which we have identified in the Corvina field but for which no market has yet been secured and related financing has yet to be obtained.

Our activities in Peru also include analysis and evaluation of technical data on our properties, preparation of the development plans for the properties, meeting requirements under the license contracts, procuring equipment for an extended drilling campaign, obtaining all necessary environmental, technical and operating permits, optimizing current production and obtaining preliminary engineering and design of the power plant and gas processing facilities.

Our Business Plan

Our business plan is to enhance shareholder value through application of our knowledge of our targeted areas in Peru and to leverage management’s experience with the local suppliers and regulatory authorities to effectively and efficiently (i) identify and quantify the potential value of our oil and gas holdings in Peru; (ii) develop and increase production and cash flows from our identified holdings; (iii) create an additional revenue stream through implementation of our gas marketing strategy and (iv) bring working interest partners into some or all of our Peruvian blocks to facilitate the exploration and development of these blocks.

Our focus is to reappraise and develop properties that we control under license agreements in northwest Peru that have been explored by other companies that have reservoirs that appear to contain commercially productive quantities of oil and gas, as well as other areas that have geological formations that we believe potentially contain commercial amounts of hydrocarbons.

Our management team has extensive engineering, geological, geophysical, technical and operational experience and valuable knowledge of oil and gas operations throughout Latin America and, in particular, Peru.

31

Two of the four blocks (Block Z-1 and Block XXIII) contain structures drilled by previous operators who encountered hydrocarbons. However, at the time the wells were drilled, the operators did not consider it economically feasible to produce those hydrocarbons.  Having tested oil in Block Z-1 in our first well in the Corvina field in 2007, and our first well in Albacora in December 2009, we are focusing on development of the proved oil reserves in those two fields. Before considering further drilling activity in Block XIX we are planning to acquire additional seismic data. In Block XXII, the environmental assessment process for an environmental permit is underway and approval must be received before anticipated drilling can begin in 2015. In January 2014, we spudded the first of three exploration wells, the Caracol 1X, in Block XXIII. The Cardo 2X exploratory well was spud in late March 2014 and the Piedra Candela 3X exploratory well was spud in late April 2014. We continue with testing of the three exploration wells that are part of this exploration campaign.

In the near term, management is focused on drilling operations at both the new platform, the CX-15, in the Corvina field and at the A platform in the Albacora field, utilizing the results of the 1,600 square kilometers (“km”) of three dimensional (“3-D”) seismic survey in Block Z-1, and three exploratory wells in Block XXIII.

Credit Suisse Securities (USA) LLC is managing the formal process to find a joint venture partner for Blocks XIX and XXIII. The two Blocks comprise over 800,000 acres and hold both oil and gas potential, with Block XXIII bordering the northern part of the prolific Talara oil fields. Interested parties have reviewed the data, however, we believe it would be in the best interests of the Company to further de-risk the Block XXIII prospects after the drilling of three shallow exploratory wells on the large anticline identified by 3-D seismic to prove the existence of hydrocarbons before pursuing further partnering opportunities.

In addition, our business plan includes a gas-to-power project as part of our overall gas marketing strategy, which entails the installation of a 10 mile gas pipeline from the CX-11 platform to shore, the construction of gas processing facilities and the building of an approximately 135 megawatt (“MW”) simple cycle electric generating plant. The proposed power plant site is located adjacent to an existing substation and power transmission lines which, with certain upgrades, are expected to be capable of handling up to 420 MW of power. The power generation facility may be part- or wholly-owned by us, or wholly-owned by a third party. The gas-to-power project is planned to generate a revenue stream by creating a market for the non-associated gas in our Corvina field that is currently shut-in. This project has not yet been financed and we continue to consider the alternatives for the project. Meanwhile, we have obtained certain permits and are in the process of obtaining additional permits to proceed with the project.

Oil Development

General

We plan to conduct additional drilling activities based in part on an ongoing assessment of economic efficiencies, license contract requirements, likely success and logistical issues such as scheduling, required maintenance and replacement of equipment and consultation with our joint venture partner with respect to Block Z-1.  This assessment could result in increased emphasis and activities on a given prospect and conversely, could result in decreased emphasis on a given prospect for a period of time.  In particular, we will assess allocation of our current resources among the Corvina, Albacora, and other Block Z-1 prospects and certain onshore prospects as they develop, along with our gas-to-power project.

Further, our ability to produce reserves in the Corvina and Albacora fields depends on our ability to finance our continued operations and get our produced oil to market. Any failure in meeting these requirements could negatively affect our reserves and their value as reported under the Securities and Exchange Commission (“SEC”) rules. Therefore, in the evaluation of reserves, we attempt to account for all possible delays we can reasonably predict and their impact on the production forecast and remaining reserves to be produced.

Block Z-1

The Block Z-1 License Contract provides for an initial exploration phase of seven years, and exploration can continue for an additional six years (in three two-year periods). Each period has a commitment for exploration activities and requires a financial guarantee to secure the performance of the work commitment during such period. We are in the exploitation phase in Block Z-1 which requires one exploration well or 225 exploration work units in each of the three two-year periods. We received approval from Perupetro for the initial two-year period and have committed to drill an exploratory well.The initial two-year phase was originally set to expire in January 2015, but has been extended to July 2015. At the end of the third two-year period, we will be required by the License Contract to surrender back to Perupetro all unexplored areas in Block Z-1.

32

Divestiture

On April 27, 2012, we and Pacific Rubiales (together with its subsidiaries) executed a SPA under which we formed an unincorporated joint venture with Pacific Rubiales to explore and develop the offshore Block Z-1 located in Peru. Pursuant to the Stock Purchase Agreement (“SPA”), Pacific Rubiales agreed to pay $150.0 million for a 49% participating interest, including reserves, in Block Z-1 and agreed to fund $185.0 million of our 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 a $65.0 million down payment on the purchase price and other funds which we initially accounted for as loans to continue to fund our 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. We 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.

The development of Block Z-1 is subject to terms and conditions of a Joint Operating Agreement with Pacific Rubiales that governs the legal, technical and operating rights and obligations of the parties with respect to the operation of Block Z-1. Under the agreement we are the operator and responsible for the administrative, regulatory, government and community related duties, and Pacific Rubiales manages the technical and operating duties in Block Z-1. The Joint Operating Agreement will continue for the term of the License Contract and thereafter until all decommissioning obligations under the License Contract have been satisfied.

At June 30, 2014 and December 31, 2013, the carry amount was $45.6 million and $81.3 million, respectively.

At June 30, 2014 and December 31, 2013, we reflected $40.7 million and $23.9 million, respectively, as other current liabilities and zero and $16.8 million, respectively, as other non-current liabilities for exploratory expenditures related to Block Z-1 funding by Pacific Rubiales of the exploratory expenditures in Block Z-1 incurred in 2012. This amount will be settled by us and Pacific Rubiales under the terms of the SPA.

Corvina Field

We originally began producing oil from the CX-11 platform, located in the Corvina field within the offshore Block Z-1 in northwest Peru, under a well testing program that started on November 1, 2007.  The Corvina field was placed into commercial production on November 30, 2010.  On the CX-11 platform, we have completed a total of nine gross (4.6 net) oil wells. Produced oil is kept in production inventory until such time as it is delivered to the refinery. The oil is delivered by vessel to storage tanks at the refinery in Talara owned by the Peruvian national oil company, Petroleos del Peru – PETROPERU S.A., which is located 70 miles south of the platform.

The CX-15 platform was anchored in the West Corvina field, one mile south of the existing CX-11 platform, in the second half of September 2012. On November 8, 2012, we received an environmental permit from the Direccion General de Asuntos Ambientales Energeticos (“DGAAE”) allowing us to begin the drilling and subsequent operation of all production and injection facilities on the new CX-15 platform at the Corvina field. We installed three pipelines between the two Corvina platforms and one pipeline from the CX-15 platform to the discharge manifold for the floating storage and offloading vessel.

Modifications were made to the platform monitoring and control systems necessary to facilitate operation of the CX-15 platform. Equipment is tracking platform response to weather and ocean conditions as well as draft. As a precaution, an anchoring system was installed to provide redundancy to the spud can, which anchors the platform. In July 2013 we spudded the first development well, the CX15-1D, from the new CX-15 platform. Production began in October 2013 from the CX15-1D well. We spudded the second development well, the CX15-2D, in November 2013. The well was drilled near the existing CX11-18XD well to a measured depth of approximately 9,000 feet. We completed the CX15-2D well in January 2014. Production from the CX15-2D well began in February 2014. We spudded the CX15-3D development well in February 2014 and production began in April 2014. In July 2014, the CX-15-3D well was shut in due to high water production. The well is being evaluated to determine the appropriate work plan. Also, we spudded the CX15-5D development well in April 2014 and production began in July 2014. The CX-15-7D well was spud in July 2014.

33

Production at each of the Corvina oil wells has declined differently, partly due to the fact that these wells were completed in different zones and some of the wells encountered mechanical problems. The wells have all initially shown typical solution gas drive behavior which can lead to significant production declines during the first year before leveling off to sustainable rates. We believe these results are influenced by technical/mechanical problems encountered with our initial wells, including unintentional production from intervals in the gas cap; however, it is possible we will see similar production declines with new Corvina wells. We believe that our initiation of gas reinjection into the gas cap is helping to slow production decline rates. The work planned during the development drilling program as well as the data we plan to collect during this program should help us to better understand future performance expectations.

Albacora Field

The Albacora field is located in the northern part of our offshore Block Z-1 in northwest Peru.  The current area of interest within the Albacora field is located in water depths of less than 100 feet. We currently have completed a total of seven gross (3.6 net) oil wells. We had been producing oil from the Albacora field from December 2009 through late October 2012 under various extended well testing permits.

Installation of the gas and water reinjection equipment was completed on the Albacora A platform and the equipment was ready for reinjection start up early in the first quarter of 2012. We received the required environmental permit for gas injection on October 29, 2012. The Albacora field is no longer subject to an extended well testing program. We spudded a development well, the A-18D well, from the A platform in the Albacora field of Block Z-1 in September 2013. This well was completed in December 2013. The A-18D well, which began producing at the end of 2013, was shut-in in late March 2014 due to gas intrusion. The well is being sidetracked to a depth of 13,600 feet which is 1000 feet deeper than the original A-18D well depth. We also spudded a development well, the A-19D well, from the A platform in the Albacora field of Block Z-1 on January 1, 2014. The A-19D well began production on March 1, 2014. The A-21D development well was spud in early March 2014 and production began in May 2014. In July 2014, the A-21D well was shut in due to high water production. The well is being evaluated to determine the appropriate work plan. We spudded the A-26D development well in May 2014 and production began in July 2014.   

Block Z-1 Seismic

We completed the 3-D seismic survey and seismic data processing of the area to assess our prospects before conducting further drilling operations, as well as to comply with our exploration commitments under our Block Z-1 License Contract.

The technical team continues to interpret the Block Z-1 3-D seismic data.  

Block XIX 

We are in the fourth exploration phase in Block XIX which requires 117 exploration work units which will determine our exploration commitment for the period.

We have received approval from Perupetro to conduct a limited 3-D seismic survey as part of our minimum work commitment for the fourth exploration period to further evaluate future drilling locations. The environmental assessment process is underway to obtain an environmental permit for the additional seismic work.

Block XXII

We are in the second exploration phase in Block XXII which requires one exploration well.

As a result of the 258 km of 2-D seismic survey completed in 2011, three prospects and one lead have been defined. Evaluation continues and we expect to develop a detailed assessment of each prospect in order to define their technical merit and risk to determine their exploration potential. We expect to conduct an additional 2-D seismic program as confirmation of potential drilling locations, and plan to drill exploratory tests after receipt of the necessary environmental permits.

We have notified Perupetro that the commitment for the second exploration period will be the drilling of one well. The timing of the actual drilling in Block XXII will depend on approval of the environmental assessment, which is underway, and subsequent receipt of the necessary ancillary permits. Drilling on Block XXII is expected in 2015.

Block XXIII

We are in the second exploration phase in Block XXIII which requires 678 exploration work units which will determine the number of wells drilled.

34

In 2011, we acquired approximately 370 square km of 3-D seismic data and 312 km of 2-D seismic data which included certain areas of interest within the Palo Santo region and four other prospects that are a part of the Mancora gas play. The processing of the 3-D and 2-D data of Block XXIII has been completed and evaluated.

The environmental permits for the drilling of several prospects identified by the 2-D and 3-D seismic data acquired in 2011 on Block XXIII were approved in January 2013. We have received approval to move the previously agreed drilling locations to conform to the 3-D seismic results.

We spudded an exploration well, the Caracol 1X, on January 5, 2014. This was the first of three exploratory wells drilled in Block XXIII in 2014. The depth of the Caracol 1X well is approximately 3,500 feet. Logs were run after reaching total depth to determine testing intervals, and casing was set to test the selected intervals. A number of intervals were selected for testing. Two Heath Formation intervals at approximately 1,500 feet in depth tested gas with formation water. Subsequently, an upper interval in the Zorritos Formation with oil shows was perforated and later stimulated. Testing of this interval, along with other prospective intervals, will continue with a workover rig. The Cardo 2X exploratory well was spud in late March 2014, and reached a total depth of 3,800 feet in April 2014. The Piedra Candela 3X exploratory well was spud in late April 2014 and reached a total depth of 3,515 feet in May 2014. Testing of the Cardo 2X well and the Piedra Candela 3X well will continue with the workover rig used on the Caracol 1X well.

 Marine Operations

In December 2013, we entered into a Management Services Agreement with a third party operator to manage our marine fleet. We transferred our BPZ Marine S.R.L. employees to the new operator in the fourth quarter of 2013.

Gas-to-Power Project

Our gas-to-power project entails the planned installation of an approximately 10-mile gas pipeline from the CX-11 platform to shore, the construction of gas processing facilities and a 135 MW net simple-cycle power generation facility.  The proposed power plant site is located adjacent to an existing substation near Zorritos and a 220 kilovolt transmission line which is now capable of handling up to 420 MW of power. The existing substation and transmission lines are owned and operated by third parties.

In order to support our proposed electric generation project, we commissioned an independent power market analysis for the region. The Peruvian electricity market is deregulated and power is transported through an interconnected national grid managed by the Committee for Economic Dispatching of Electricity. Based on this study, we believe we will be able to sell, under contract, economic quantities of electricity from the initial 135 MW power plant. The market study also indicates that there may be future opportunities for us to generate and sell significantly greater volumes of power into the Peruvian and possibly Ecuadorian power markets.  Accordingly, the revenues from the natural gas delivered to the power plant will be derived from the sale of electricity.

We currently estimate the gas-to-power project will cost approximately $153.5 million, excluding capitalized interest, working capital and 18% value-added tax which will be recovered via future revenue billings.  The $153.5 million includes $133.5 million for the estimated cost of the power plant and $20.0 million for the natural gas pipeline. While we have held initial discussions with several potential joint venture partners for the gas-to-power project in an attempt to secure additional financing and other resources for the project, we have not entered into any definitive agreements with a potential partner.  In the event we are able to identify and reach an agreement with a potential joint venture partner, we may retain only a minority position in the project, or the power generation facility may be wholly-owned by a third party. However, we, along with our Block Z-1 partner, expect to retain the responsibility for the construction and ownership of the pipeline. We have obtained certain permits and are in the process of obtaining additional permits to proceed with the project.

35

Results of Operations

The following table sets forth revenues and operating expenses for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2014		2013			Increase/ (Decrease)			2014		2013			Increase/ (Decrease)
	(in thousands except per bbl information)								(in thousands except per bbl information)
Net sales volume:
Oil (MBbls)		240		136			104			452		265			187
Net revenue:
Oil revenue, net	$	24,190	$	12,776		$	11,414		$	45,094	$	26,057		$	19,037
Other revenue		65		39			26			137		70			67
Total net revenue		24,255		12,815			11,440			45,231		26,127			19,104
Average sales price (approximately):
Oil (per Bbl)	$	100.63	$	93.94		$	6.69		$	99.77	$	98.48		$	1.29
Operating and administrative expenses:
Lease operating expense		6,744		8,102			(1,358	)		11,967		14,775			(2,808	)
General and administrative expense		6,375		6,451			(76	)		12,572		11,926			646
Geological, geophysical and engineering expense		1,270		746			524			2,091		1,104			987
Depreciation, depletion and amortization expense		5,503		7,955			(2,452	)		12,115		14,859			(2,744	)
Standby costs		-		2,225			(2,225	)		-		3,368			(3,368	)
Other operating expense		-		-			-			-		-			-
Total operating and administrative expenses	$	19,892	$	25,479		$	(5,587	)	$	38,745	$	46,032		$	(7,287	)
Operating income (loss)	$	4,363	$	(12,664	)	$	17,027		$	6,486	$	(19,905	)	$	26,391

Net Oil Revenue

For the three months ended June 30, 2014, our net oil revenue increased by $11.4 million to $24.2 million from $12.8 million for the same period in 2013. The increase in net oil revenue is due to an increase in the amount of oil sold of 104 MBbls and an increase of $6.69, or 7.1%, in the average per barrel sales price received. Total sales for the three months ended June 30, 2014 were 240 MBbls compared to 136 MBbls for the same period in 2013.

The increase in amount of oil sold for the three months ended June 30, 2014 compared to the same period in 2013 is due to increased production in the Albacora field from the A-18D, A-19D and A-21D wells and increased production from the CX-15 platform from the CX15-1D, CX15-2D and CX15-3D wells.

For the six months ended June 30, 2014, our net oil revenue increased by $19.0 million to $45.1 million from $26.1 million for the same period in 2013. The increase in net oil revenue is due to an increase in the amount of oil sold of 187 MBbls and an increase of $1.29, or 1.3%, in the average per barrel sales price received. Total sales for the six months ended June 30, 2014 were 452 MBbls compared to 265 MBbls for the same period in 2013.

The increase in amount of oil sold for the six months ended June 30, 2014 compared to the same period in 2013 is due to increased production in the Albacora field from the A-18D, A-19D and A-21D wells and increased production from the CX-15 platform from the CX15-1D, CX15-2D and CX15-3D wells.

The price/volume analysis is as follows:

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	(in thousands)
2013 Oil revenue, net	$	12,776	$	26,057
Changes associated with sales volumes		9,805		18,454
Changes associated with prices		1,609		583
2014 Oil revenue, net	$	24,190	$	45,094

36

For the three months ended June 30, 2014, the increase in oil production is due to increased production in the Albacora field as the A-18D, A-19D and A-21D wells contributed to production volumes during the second quarter of 2014. At the Corvina field, the declines in production from the wells at the CX-11 platform were more than offset by the new production from the CX-15 platform’s CX15-1D, CX15-2D, and CX15-3D wells. Total oil production for the three months ended June 30, 2014 was 238 MBbls compared to 130 MBbls for the same period in 2013.

For the six months ended June 30, 2014, the increase in oil production is due to increased production in the Albacora field as both the A-18D, A-19D and A-21D contributed to production volumes during the first half of 2014. At the Corvina field, the declines in production from the wells at the CX-11 platform were more than offset by the new production from the CX-15 platform’s CX15-1D, CX15-2D, and CX15-3D wells. Total oil production for the six months ended June 30, 2014 was 469 MBbls compared to 264 MBbls for the same period in 2013.

The revenues above are reported net of royalties owed to the government of Peru. Royalties are assessed by Perupetro as stipulated in the Block Z-1 License Contract based on production levels.

The following table is the amount of royalty costs related to gross revenues for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
	(in thousands)
Royalty costs	$	1,383	$	697	$	2,554	$	1,403
	$	1,383	$	697	$	2,554	$	1,403

Other Revenue

For the three months ended June 30, 2014, other revenue increased by $26,000 to $65,000 compared to $39,000 for the same period in 2013.

For the six months ended June 30, 2014, other revenue increased by $67,000 to $137,000 compared to $70,000 for the same period in 2013.

Lease Operating Expense

Lease operating expenses include costs incurred to operate and maintain wells and related equipment and facilities, as well as crude oil transportation and inventory changes. These costs include, among others, workover expenses, maintenance and repair expenses, operator fees, processing fees, insurance and transportation expenses.

For the three months ended June 30, 2014, lease operating expenses decreased by $1.3 million to $6.8 million ($28.06 per Bbl) from $8.1 million ($59.57 per Bbl) for the same period in 2013. The decrease is due to workover expenses decreasing $2.8 million due to no major workovers performed in 2014 compared to one major workover in 2013 and lower other lease operating expenses of $0.3 million, partially offset by higher crude oil transportation expense of $1.8 million due to higher crude oil sales.

For the six months ended June 30, 2014, lease operating expenses decreased by $2.8 million to $12.0 million ($26.48 per Bbl) from $14.8 million ($55.83 per Bbl) for the same period in 2013. The decrease is due to workover expenses decreasing $4.7 million due to no major workovers performed in 2014 compared to one major workover in 2013 million and lower other lease operating expenses of $0.3 million, partially offset by higher crude oil transportation expense of $2.2 million due to higher crude oil sales.

General and Administrative Expense 

General and administrative expenses are overhead-related expenses, including employee compensation, legal, consulting and accounting fees, insurance, and investor relations expenses.

For the three months ended June 30, 2014, general and administrative expenses were $6.4 million and $6.4 million for the same period in 2013.  Stock-based compensation expense, a subset of general and administrative expenses, was $0.8 million for the three months ended June 30, 2014 and $0.9 million for the same period in 2013. Other general and administrative expenses increased $0.1 million to $5.6 million from $5.5 million for the same period in 2013. The $0.1 million increase is due to a higher ship management fee of $0.5 million and higher indirect charges from our Block Z-1 partner of $0.3 million, partially offset by lower salary and related costs of $0.5 million due to fewer employees and lower other general and administrative expenses of $0.2 million.

37

For the six months ended June 30, 2014, general and administrative expenses increased by $0.7 million to $12.6 million from $11.9 million for the same period in 2013.  Stock-based compensation expense, a subset of general and administrative expenses, was $1.6 million for the six months ended June 30, 2014 and $1.6 million for the same period in 2013. Other general and administrative expenses increased $0.7 million to $11.0 million from $10.3 million for the same period in 2013. The $0.7 million increase is due to higher indirect charges from our Block Z-1 partner of $1.1 million and a higher ship management fee of $0.8 million, partially offset by lower salary and related costs of $1.2 million due to fewer employees.

Geological, Geophysical and Engineering Expense

Geological, geophysical and engineering expenses include laboratory, environmental and seismic acquisition related expenses.

For the three months ended June 30, 2014, geological, geophysical and engineering expenses increased $0.6 million to $1.3 million compared to $0.7 million for the same period in 2013. This increase is due to higher environmental impact assessment work to prepare for seismic programs of $0.4 million.

For the six months ended June 30, 2014, geological, geophysical and engineering expenses increased $1.0 million to $2.1 million compared to $1.1 million for the same period in 2013. This increase is due to higher environmental impact assessment work to prepare for seismic programs of $0.6 million.

Depreciation, Depletion and Amortization Expense

For the three months ended June 30, 2014, depreciation, depletion and amortization expense decreased $2.5 million to $5.5 million from $8.0 million for the same period in 2013. For the six months ended June 30, 2014, depreciation, depletion and amortization expense decreased $2.8 million to $12.1 million from $14.9 million for the same period in 2013.

For the three months ended June 30, 2014, depletion expense decreased $2.4 million to $3.3 million from $5.7 million during the same period in 2013. For the six months ended June 30, 2014, depletion expense decreased $2.6 million to $7.7 million from $10.3 million during the same period in 2013. Depletion decreased in both periods due to capital costs in Block Z-1 reimbursed under the carry agreement with Pacific Rubiales and reserves added to the depletion base in 2014.

For the three months ended June 30, 2014, depreciation expense decreased $0.1 million to $2.2 million compared to $2.3 million for the same period in 2013. For the six months ended June 30, 2014, depreciation expense decreased $0.2 million to $4.4 million compared to $4.6 million for the same period in 2013.

Standby Costs

For the three months ended June 30, 2014, we incurred no standby costs. During the three months ended June 30, 2013, the Company incurred $2.3 million in standby costs.

During the three months ended June 30, 2013, we had the Petrex-28 rig on standby for three months.

For the six months ended June 30, 2014, we incurred no standby costs. During the six months ended June 30, 2013, the Company incurred $3.4 million in standby costs.

During the six months ended June 30, 2013, we had the Petrex-10 rig either partially or fully on standby for two months and the Petrex-28 rig either partially or fully on standby for approximately five months.  

Other Income (Expense)

Other income (expense) includes non-operating income items. These items include interest expense and income, loss on the extinguishment of debt, gains or losses on foreign currency transactions, income and amortization related to the investment in our Ecuador property as well as gains or losses on derivative financial instruments. For the three months ended June 30, 2014, total other expense decreased $2.6 million to $4.8 million compared to $7.4 million during the same period in 2013. For the six months ended June 30, 2014, total other expense decreased $4.1 million to $8.5 million compared to $12.6 million during the same period in 2013.The change is due to the following:

38

Interest expense: For the three months ended June 30, 2014, we recognized approximately $3.6 million of net interest expense, which included $6.6 million of interest expense reduced by $3.0 million of capitalized interest expense. For the same period in 2013, we recognized $4.3 million in net interest expense, which included $6.7 million of interest expense reduced by $2.4 million of capitalized interest. The decrease of $0.7 million in net interest expense is due to higher interest capitalized of $0.6 million from a higher average construction in progress and lower interest expense of $0.1 million.

For the six months ended June 30, 2014, we recognized approximately $7.4 million of net interest expense, which included $13.3 million of interest expense reduced by $5.9 million of capitalized interest expense. For the same period in 2013, we recognized $8.6 million in net interest expense, which included $13.6 million of interest expense reduced by $5.0 million of capitalized interest. The decrease of $1.2 million in net interest expense is due to higher interest capitalized of $0.9 million from a higher average construction in progress, and lower interest expense of $0.3 million resulting from a lower average interest cost of debt outstanding between the periods. In May 2013, we retired the remaining $30.5 million of the $75.0 million secured debt facility and in September 2013 we retired the remaining $36.0 million of the $40.0 million secured debt facility.

Loss on extinguishment of debt: In April 2014, $26.0 million of the aggregate principal amount of the 2015 Convertible Notes were exchanged for an additional $25.0 million aggregate principal amount of 2017 Convertible Notes in a private transaction. As a result of the exchange during the second quarter of 2014, we incurred a $1.2 million loss. This amount was recognized as a “Loss on extinguishment of debt” in the Consolidated Statement of Operations. For the three and six months ended June 30, 2014, we reported $1.2 million as a loss on extinguishment of debt.

As a result of the prepayment of the remaining $30.5 million of the $75.0 million secured debt facility during the second quarter of 2013, we incurred $2.4 million of fees and a prepayment premium and expensed $1.4 million of unamortized debt issue costs. These amounts were recognized as a “Loss on extinguishment of debt” in the Consolidated Statement of Operations. For the three and six months ended June 30, 2013, we reported $3.8 million as a loss on extinguishment of debt.

Gain (loss) on derivatives: In connection with obtaining the $40.0 million and $75.0 million secured debt facilities in January and July 2011, respectively, we entered into performance based arranger fees (“Performance Based Arranger Fee”) that we are accounting for as embedded derivatives. As a result of the fair value measurement at June 30, 2014 and 2013, respectively, the loss associated with the embedded derivatives increased $1.5 million to a $0.3 million loss for the three months ended June 30, 2014 from a $1.2 million gain for the same period in 2013, and from the measurement at January 1, 2014, and January 1, 2013, respectively, the loss associated with the embedded derivatives increased $0.9 million to a $0.2 million loss for the six months ended June 30, 2014 from a $0.7 million gain for the same period in 2013.

Other income (expense): For the three months ended June 30, 2014, other income increased $0.7 million to $0.2 million of income compared to $0.5 million of expense for the same period in 2013. For the three months ended June 30, 2014 and 2013, foreign currency gains (losses), a component of other expense, were zero and ($0.9) million, respectively.

For the six months ended June 30, 2014, other income increased $1.2 million to $0.3 million of income compared to $0.9 million loss for the same period in 2013. For the six months ended June 30, 2014 and 2013, foreign currency gains (losses), a component of other income, were ($0.1) million and ($1.1) million, respectively.

39

Income Taxes

The following is a summary of income (loss) before income taxes and income tax expense (benefit) for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013
	(in thousands)
Income (loss) before income taxes:
United States	$	(4,882	)	$	(5,543	)	$	(9,943	)	$	(9,193	)
Foreign		4,458			(14,474	)		7,899			(23,278	)
	$	(424	)	$	(20,017	)	$	(2,044	)	$	(32,471	)

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2014		2013			2014		2013
	(in thousands)
Income tax expense (benefit):
United States	$	-	$	(322	)	$	-	$	668
Foreign		2,125		(55	)		4,075		(715	)
	$	2,125	$	(377	)	$	4,075	$	(47	)

We have recognized a gross deferred tax asset related to net operating loss carryforwards attributable to the United States, before application of the valuation allowances. We have a valuation allowance for the full amount of the domestic net deferred tax asset, as we believe, based on the weight of available evidence, that it is more likely than not that the deferred tax asset will not be realized prior to the expiration of net operating loss carryforwards in various amounts through 2033. Furthermore, because we have no operations within the U.S. taxing jurisdiction, it is likely that sufficient generation of revenue to offset our deferred tax asset is remote.

The difference from the 22% statutory rate provided for under the Block Z-1 License Contract is due to other Peruvian operations that have a different statutory tax rate, certain expenses which are not deductible in Peru and a change in the timing of when certain expenses are deductible.

The June 30, 2014 and December 31, 2013 balance of unrecognized tax benefits includes $0.7 million that, if recognized, would impact our effective income tax rate. Over the next 12 months, we do not anticipate any reduction in the balance. We have accrued interest and penalties related to unrecognized tax benefits of $46,000 at both June 30, 2014 and December 31, 2013. Estimated interest and penalties related to potential underpayment on unrecognized tax benefits, if any, are classified as a component of income tax expense in the Consolidated Statement of Operations.

Net Loss

For the three months ended June 30, 2014, our net loss decreased $17.1 million to a net loss of $2.5 million or ($0.02) per basic and diluted share from a net loss of $19.6 million or ($0.17) per basic and diluted share for the same period in 2013. For the six months ended June 30, 2014, our net loss decreased $26.3 million to a net loss of $6.1 million or ($0.05) per basic and diluted share from a net loss of $32.4 million or ($0.28) per basic and diluted share for the same period in 2013.

Liquidity, Capital Resources and Capital Expenditures

At June 30, 2014, we had cash and cash equivalents of $67.2 million, an accounts receivable balance of $20.7 million and a working capital deficit of $6.7 million.

At June 30, 2014, we had trade accounts payable and accrued liabilities of $15.1 million.

At June 30, 2014, our outstanding debt consisted of the 2015 Convertible Notes, whose net amount of $58.2 million includes the $59.9 million of principal reduced by $1.7 million of the remaining unamortized discount, and the 2017 Convertible Notes, whose net amount of $152.8 million includes the $168.7 million of principal reduced by $15.9 million of the remaining unamortized discount. At June 30, 2014, the current and long-term portions of our long-term debt were $58.2 million and $152.8 million, respectively.

40

	For the Six Months Ended
	June 30,
Cash Flows	2014			2013
	(in thousands)
Cash provided by (used in):
Operating activities	$	29,076		$	(1,762	)
Investing activities		(18,993	)		57,277
Financing activities		(277	)		(35,223	)

Operating Activities

Cash provided by operating activities increased by $30.9 million to a source of cash of $29.1 million for the six months ended June 30, 2014 from a use of cash of $1.8 million for the same period in 2013. The change in cash flows before changes in operating assets and liabilities provided an increase in the source of cash of $26.6 million due to higher revenues and lower lease operating expenses and standby costs. Changes in cash flow as a result of changes in operating assets and liabilities provided a increase in the source of cash of $4.3 million. The increase in the source of cash is due to the changes in liabilities (accrued liabilities of $14.7 million and income taxes payable of $11.9 million, partially offset by the change in accounts payable of $19.2 million) providing an increase in the source of cash of $7.4 million. Partially offsetting these amounts are changes in assets (accounts receivable of $15.4 million, partially offset by changes in value-added tax receivables, inventory and other assets of $12.0 million) providing a decrease in the source of cash of $3.1 million.

Investing Activities

Net cash used in investing activities increased by $76.3 million to $19.0 million for the six months ended June 30, 2014 from a source of cash of $57.3 million for the same period in 2013. The increase in cash used in investing activities is due to a release of restricted cash of $63.7 million from principal repayments of the $75.0 million secured debt facility and the $40.0 million secured debt facility in the first three months of 2013 compared to $0.2 million change in restricted cash in the first three months of 2014, and increased capital expenditures of $13.8 million in 2014 due to our development initiatives for the exploration and production of our onshore oil and natural gas reserves. Partially offsetting these amounts is the change in the purchase of investment securities of $1.0 million in 2013.

2014 Capital Expenditures

During the six months ended June 30, 2014, we incurred net capital expenditures of approximately $19.3 million associated with our development initiatives for the exploration and production of oil and natural gas reserves and the complementary development of gas-fired power generation of electricity for sale in Peru.

The capital expenditures added were approximately $13.3 million related to the exploration of Block XXIII, which included capitalized interest of $0.8 million, approximately $5.1 million of costs related to the power plant, which consisted of capitalized interest of $4.7 million, and other capital expenditures incurred were approximately $0.9 million, which included capitalized interest of $0.5 million.

The transfer of a 49% participating interest in Block Z-1 to Pacific Rubiales was effective on December 14, 2012. Pursuant to the carry agreement, Pacific Rubiales provided funding for 100% of capital expenditures for Block Z-1 of $69.9 million for the six months ended June 30, 2014. These gross capital expenditures include approximately $32.1 million related to the CX-15 development drilling program, approximately $31.0 million related to the development drilling program in Albacora and expenditures incurred related to the CX-15 platform of approximately $0.9 million.

Financing Activities

Cash used in financing activities decreased by $34.9 million to a use of cash of $0.3 for the six months ended June 30, 2014, compared to a use of cash of $35.2 million for the same period in 2013. The decrease in cash used in financing activities is due to debt repayments of $46.1 million in 2013 compared to zero in 2014 (the repayment of $38.9 million under the $75.0 million secured facility in 2013 and the repayment of $7.2 million under the $40.0 million secured facility in 2013) and debt issue costs and other of $3.6 million in 2013 compared to $0.3 million in 2014, partially offset by debt borrowings in 2013 of $14.5 million compared to zero in 2014 (drawdown of $14.5 million from the $40.0 secured debt facility in May 2013).

41

Shelf Registration

To finance our operations, we may sell additional shares of our common stock or other securities. Our certificate of formation does not provide for preemptive rights, although we may grant similar rights by contract from time to time. We currently have $500.0 million available under an effective shelf registration statement for debt securities, common stock, preferred stock, depositary shares and securities warrants, subscription rights, units or any combination thereof, which we may sell from time to time in one or more offerings pursuant to underwritten public offerings, negotiated transactions, at the market transactions, block trades or a combination of these methods. This registration statement will expire on January 2, 2017.

Debt Obligations

At June 30, 2014 and December 31, 2013, debt consisted of the following:

	June 30, 2014		December 31, 2013
	(in thousands)
Convertible Notes, 8.5%, due October 2017, net of discount of ($15.9) million at June 30, 2014 and ($18.3) million at December 31, 2013	$	152,787	$	125,416
Convertible Notes, 6.5%, due March 2015, net of discount of ($1.7) million at June 30, 2014 and ($4.4) million at December 31, 2013		58,169		81,523
		210,956		206,939
Less: Current maturity of long-term debt		58,169		-
Long-term debt, net	$	152,787	$	206,939

Convertible Notes due 2017

During the third quarter of 2013, we closed on an offering for an aggregate principal amount of $143.8 million of convertible notes due 2017 which includes the exercise of the underwriter’s option to purchase an additional $18.8 million of the 2017 Convertible Notes in addition to the original offering of $125.0 million. The 2017 Convertible Notes are general senior unsecured obligations and rank equally in right of payment with all of our other existing and future senior unsecured indebtedness and rank senior in the right of payment to all of our existing and future subordinated debt.  The 2017 Convertible Notes are effectively subordinate to any secured indebtedness we may have to the extent of the value of the assets collateralizing such indebtedness.  The 2017 Convertible Notes are not guaranteed by our subsidiaries. In April 2014, $26.0 million of the aggregate principal amount of the 2015 Convertible Notes were exchanged for an additional $25.0 million aggregate principal amount of 2017 Convertible Notes in a private transaction. As a result, we have $168.7 million principal amount of 2017 Convertible Notes outstanding at June 30, 2014.

The interest rate on the 2017 Convertible Notesis 8.50% per year with interest payments due on April 1st and October 1st of each year.  The 2017 Convertible Notes mature with repayment of the $168.7 million principal amount (assuming no conversion) on October 1, 2017 (the “2017 Maturity Date”).

The conversion rate is 249.5866 shares per $1,000 principal amount (equal to an initial conversion price of approximately $4.0066 per share of common stock). Upon conversion, if conversion is elected by the noteholders, we must deliver, at our option, either (1) a number of shares of our common stock determined as set forth in the Indenture agreement dated September 24, 2013 (the “2013 Indenture”), (2) cash, or (3) a combination of cash and shares of our common stock.

Holders may convert their 2017 Convertible Notes at their option at any time prior to the close of business on the second business day immediately preceding the 2017 Maturity Date under any of the following circumstances:

(1) during any fiscal quarter (and only during such fiscal quarter) commencing after October 1, 2013, if the last reported sale price of our common stock is greater than or equal to 130% of the conversion price of the 2017 Convertible Notes for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter;

(2) prior to July 1, 2017, during the five business-day period after any ten consecutive trading-day period in which the trading price of $1,000 principal amount of the 2017 Convertible Notes for each trading day in the measurement period was less than 97% of the product of the last reported sale price of our common stock and the conversion rate on such trading day; or

(3) upon the occurrence of one of a specified number of corporate transactions.

42

Holders may also convert the 2017 Convertible Notes at their option at any time beginning on July 1, 2017, and ending at the close of business on the second business day immediately preceding the 2017 Maturity Date or may hold the 2017 Convertible Notes to maturity and be paid their outstanding principal in cash.

We may not redeem the 2017 Convertible Notes prior to the 2017 Maturity Date.

If we experience any one of certain specified types of corporate transactions, holders may require us to purchase all or a portion of their 2017 Convertible Notes. Any repurchase of the 2017 Convertible Notes pursuant to these provisions will be for cash at a price equal to 100% of the principal amount of the notes to be purchased plus any accrued and unpaid interest to, but excluding, the purchase date.

The 2013 Indenture for the 2017 Convertible Notes contains customary terms and covenants and events of default, the occurrence and continuation of which could result in the acceleration of amounts due under the 2017 Convertible Notes.

Net proceeds from the sale of the 2017 Convertible Notes, after deducting the discounts and commissions and any offering expenses payable by us, were approximately $124.5 million.  The 2017 Convertible Notes were issued with a 10% discount or $14.4 million. The underwriter received commissions of approximately $4.3 million in connection with the sale and we incurred $0.6 million of direct expenses in connection with the offering.  We used the net proceeds for general corporate purposes, including funding of our exploration and production efforts and other projects and to reduce or refinance our outstanding debt.

We accounted for the 2017 Convertible Notes in accordance with ASC Topic 470, “Debt”, as it pertains to accounting for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement). Under the accounting guidance, convertible debt instruments that may be settled entirely or partially in cash upon conversion are required to be separated into liability and equity components, with the liability component amount determined in a manner that reflects the issuer’s non-convertible debt borrowing rate. The value assigned to the liability component is determined by measuring the fair value of a similar liability that does not have an equity conversion feature. The value assigned to the equity component is determined by deducting the fair value of the liability component from the initial proceeds. The excess of the principal amount of the liability component over its carrying amount (the non-cash discount) is amortized to interest cost using the effective interest method over the term of the 2017 Convertible Notes. In addition, transaction costs incurred that directly relate to the issuance of convertible debt instruments must be allocated to the liability and equity components in proportion to the allocation of proceeds and accounted for as debt issuance costs and equity issuance costs, respectively.

We estimated our non-convertible borrowing rate at the date of issuance of the 2017 Convertible Notes to be 12.9%. The 12.9% non-convertible borrowing rate represented the borrowing rate of similar companies with the same credit quality as us and was obtained through a quote from the underwriter. Using the income method and discounting the principal and interest payments of the 2017 Convertible Notes using the 12.9% non-convertible borrowing rate, we estimated the fair value of the $143.8 million 2017 Convertible Notes to be approximately $124.5 million with the discount being approximately $19.3 million. The discount of $19.3 million includes the 10% discount of $14.4 million and the value of the equity component of $4.9 million. The discount is being amortized as non-cash interest expense over the life of the 2017 Convertible Notes using the effective interest method. In addition, we allocated approximately $2.3 million of the $4.9 million of fees and commissions as debt issue costs that are being amortized as non-cash interest expense over the life of the notes using the effective interest method. Approximately $0.1 million of fees and commissions were treated as transaction costs associated with the equity component and the remaining $2.5 million was expensed to other expense under the caption “Other income (expense)”.

As a result of the exchange during the second quarter of 2014, we estimated our non-convertible borrowing rate at the date of issuance of the $25.0 million 2017 Convertible Notes to be 7.89%. The 7.89% non-convertible borrowing rate represented the borrowing rate of similar companies with the same credit quality as us and was obtained through a quote from a financial advisor. Using the income method and discounting the principal and interest payments of the 2017 Convertible Notes with the 7.89% non-convertible borrowing rate, we estimated the fair value of the $25.0 million 2017 Convertible Notes to be approximately $25.4 million, with the premium being approximately $0.4 million. The value of the equity component was estimated at $0.5 million. The premium is being amortized as non-cash interest expense over the life of the 2017 Convertible Notes using the effective interest method. In addition, approximately $0.3 million of fees were considered debt issue costs that are being amortized as a non-cash interest expense over the life of the notes using the effective interest method. We recognized a loss on this transaction of approximately $0.9 million and this loss was included in the “Loss on extinguishment of debt” in the consolidated statement of operations in the second quarter of 2014. For further information on debt issue costs see Note-5, “Prepaid and Other Current Assets and Other Non-Current Assets.”

43

The following table is the estimated remaining cash payments as of June 30, 2014, including interest payments related to the 2017 Convertible Notes, assuming no conversion (in thousands):

Year
2014	$	7,170
2015		14,340
2016		14,340
2017		183,051
Total estimated remaining cash payments related to the 2017 Convertible Notes	$	218,901

We evaluated the 2013 Indenture for the 2017 Convertible Notes for potential embedded derivatives, noting that the conversion feature and make-whole provisions did not meet the embedded derivative criteria as set forth in ASC Topic 815, “Derivatives and Hedging”. Therefore, no additional amounts have been recorded for those items.

As of June 30, 2014, the net amount of $152.8 million includes the $168.7 million of principal reduced by $15.9 million of the remaining unamortized discount. The remaining unamortized discount of $15.9 million will be amortized into interest expense, using the effective interest method, over the remaining life of the 2017 Convertible Notes, which mature in October 2017.  At June 30, 2014, using the conversion rate of 249.5866 shares per $1,000 principal amount of the 2017 Convertible Notes, if the $168.7 million of principal were converted into shares of common stock, the notes would convert into approximately 42.1 million shares of common stock.  As of June 30, 2014, there is no excess if-converted value to the holders of the 2017 Convertible Notes as the price of our common stock at June 30, 2014, $3.08 per share, is less than the conversion price.

The annual effective interest rate on the 2017 Convertible Notes, including the amortization of debt issue costs, is approximately 12.5%.

The following table is the amount of interest expense related to the 2017 Convertible Notes, disregarding capitalized interest considerations, for the three and six months ended June 30, 2014 and 2013, respectively:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
	(in thousands)
Interest expense related to the contractual interest coupon	$	3,530	$	-	$	6,585	$	-
Amortization of debt discount expense		994		-		1,953		-
Amortization of debt issue costs		157		-		292		-
Interest expense related to the 2017 Convertible Notes	$	4,681	$	-	$	8,830	$	-

Convertible Notes due 2015

During the first quarter of 2010, we closed on a private offering for an aggregate principal amount of $170.9 million of convertible notes due 2015. The 2015 Convertible Notes are our general senior unsecured obligations and rank equally in right of payment with all of our other existing and future senior unsecured indebtedness.  The 2015 Convertible Notes are subordinate to all of our secured indebtedness to the extent of the value of the assets collateralizing such indebtedness.  The 2015 Convertible Notes are not guaranteed by our subsidiaries. In September 2013, we repurchased $85.0 million of the aggregate principal amount of the $170.9 million 2015 Convertible Notes leaving a principal balance of $85.9 million. In April 2014, $26.0 million of the aggregate principal amount of the 2015 Convertible Notes were exchanged for an additional $25.0 million aggregate principal amount of 2017 Convertible Notes in a private transaction. As a result, we have $59.9 million principal amount of 2015 Convertible Notes outstanding at June 30, 2014.

The interest rate on the 2015 Convertible Notesis 6.50% per year with interest payments due on March 1st and September 1st of each year.  The 2015 Convertible Notes mature with repayment of the remaining principal balance of $59.9 million (assuming no conversion) on March 1, 2015 (the “2015 Maturity Date”).

44

The initial conversion rate of 148.3856 shares per $1,000 principal amount (equal to an initial conversion price of approximately $6.74 per share of common stock) was adjusted on February 3, 2011 in accordance with the terms of the Indenture agreement dated February 8, 2010 (the “2010 Indenture”). As a result, the conversion rate and conversion price changed to 169.0082 shares per $1,000 principal amount and $5.9169 per share of common stock, respectively. Upon conversion, if conversion is elected by the noteholders, we must deliver, at our option, either (1) a number of shares of our common stock determined as set forth in the 2010 Indenture, (2) cash, or (3) a combination of cash and shares of our common stock.

Holders may convert their 2015 Convertible Notes at their option at any time prior to the close of business on the second business day immediately preceding the 2015 Maturity Date under any of the following circumstances:

(1) during any fiscal quarter (and only during such fiscal quarter) commencing after March 31, 2010, if the last reported sale price of our common stock is greater than or equal to 130% of the conversion price of the 2015 Convertible Notes for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter;

(2) prior to January 1, 2015, during the five business-day period after any ten consecutive trading-day period in which the trading price of $1,000 principal amount of the 2015 Convertible Notes for each trading day in the measurement period was less than 97% of the product of the last reported sale price of our common stock and the conversion rate on such trading day;

(3) if the 2015 Convertible Notes have been called for redemption; or

(4) upon the occurrence of one of a specified number of corporate transactions.

Holders may also convert the 2015 Convertible Notes at their option at any time beginning on February 1, 2015, and ending at the close of business on the second business day immediately preceding the 2015 Maturity Date or may hold the 2015 Convertible Notes to maturity and be paid their outstanding principal in cash.

As of February 3, 2013, we may redeem for cash all or a portion of the 2015 Convertible Notes at a redemption price of 100% of the principal amount of the notes to be redeemed plus any accrued and unpaid interest to, but not including, the redemption date, plus a “make-whole” payment if: (1) for at least 20 trading days in any consecutive 30 trading days ending within 5 trading days immediately before the date we mail the redemption notice, the “last reported sale price” of our common stock exceeded 175% of the conversion price in effect on that trading day, and (2) there is no continuing default with respect to the notes that has not been cured or waived on or before the redemption date.

If we experience any one of certain specified types of corporate transactions, holders may require us to purchase all or a portion of their 2015 Convertible Notes. Any repurchase of the 2015 Convertible Notes pursuant to these provisions will be for cash at a price equal to 100% of the principal amount of the notes to be purchased plus any accrued and unpaid interest to, but excluding, the purchase date.

The 2010 Indenture for the 2015 Convertible Notes contains customary terms and covenants and events of default, the occurrence and continuation of which could result in the acceleration of amounts due under the 2015 Convertible Notes.

Net proceeds from the sale of the $170.9 million of 2015 Convertible Notes, after deducting the discounts and commissions and any offering expenses payable by us, were approximately $164.9 million.  The initial purchaser received commissions of approximately $5.5 million in connection with the sale and we incurred approximately $0.6 million of direct expenses in connection with the offering.  We used the net proceeds for general corporate purposes, including capital expenditures and working capital, reduction or refinancing of debt, and other corporate obligations.

We account for the 2015 Convertible Notes in accordance with Accounting Standard Codification (“ASC”) Topic 470, “Debt”, as it pertains to accounting for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement). Under the accounting guidance, convertible debt instruments that may be settled entirely or partially in cash upon conversion are required to be separated into liability and equity components, with the liability component amount determined in a manner that reflects the issuer’s non-convertible debt borrowing rate. The value assigned to the liability component is determined by measuring the fair value of a similar liability that does not have an equity conversion feature. The value assigned to the equity component is determined by deducting the fair value of the liability component from the initial proceeds. The excess of the principal amount of the liability component over its carrying amount (the non-cash discount) is amortized to interest cost using the effective interest method over the term of the 2015 Convertible Notes. In addition, transaction costs incurred that directly relate to the issuance of convertible debt instruments must be allocated to the liability and equity components in proportion to the allocation of proceeds and accounted for as debt issuance costs and equity issuance costs, respectively.

45

We estimated our non-convertible borrowing rate at the date of issuance of the 2015 Convertible Notes to be 12%. The 12% non-convertible borrowing rate represented the borrowing rate of similar companies with the same credit quality as us and was obtained through a quote from the initial purchaser. Using the income method and discounting the principal and interest payments of the 2015 Convertible Notes using the 12% non-convertible borrowing rate, we estimated the fair value of the $170.9 million 2015 Convertible Notes to be approximately $136.3 million with the discount being approximately $34.6 million. The discount is being amortized as non-cash interest expense over the life of the notes using the effective interest method. In addition, we allocated approximately $4.8 million of the $6.1 million of fees and commissions as debt issue costs that are being amortized as non-cash interest expense over the life of the 2015 Convertible Notes using the effective interest method. The remaining $1.3 million of fees and commissions were treated as transaction costs associated with the equity component. The net amount of the equity component was $33.3 million, which included the initial discount of $34.6 million reduced by $1.3 million of direct transaction costs.

In September 2013, we repurchased $85.0 million of aggregate principal amount of the 2015 Convertible Notes. As a result of the $85.0 million repurchase during the third quarter of 2013, approximately $12.2 million of the repayment was considered a retirement of debt and the remaining $72.8 million of the repayment was considered an exchange of debt and not deemed a substantial modification of debt. The $85.0 million of 2015 Convertible Notes were repurchased with an approximate discount of 10%. We recognized a gain on the retirement of the debt of approximately $0.2 million and this gain was included in the “Loss on extinguishment of debt” in the consolidated statement of operations in the third quarter of 2013. For further information on debt issue costs see Note-5, “Prepaid and Other Current Assets and Other Non-Current Assets.”

As a result of the exchange during the second quarter of 2014, the $26.0 million of aggregate principal amount of 2015 Convertible Notes exchanged was considered a retirement of debt and deemed a substantial modification of debt. The $26.0 million of 2015 Convertible Notes were exchanged with an approximate discount of 4%. We recognized a loss on the retirement of the debt of approximately $0.3 million and this loss was included in the “Loss on extinguishment of debt” in the consolidated statement of operations in the second quarter of 2014. For further information on debt issue costs see Note-5, “Prepaid and Other Current Assets and Other Non-Current Assets.”

The following table is the estimated remaining cash payments as of June 30, 2014, including interest payments related to the 2015 Convertible Notes, assuming no conversion (in thousands):

Year
2014	$	1,946
2015		61,837
Total estimated remaining cash payments related to the 2015 Convertible Notes	$	63,783

We evaluated the 2010 Indenture for the 2015 Convertible Notes for potential embedded derivatives, noting that the conversion feature and make-whole provisions did not meet the embedded derivative criteria as set forth in ASC Topic 815, “Derivatives and Hedging.” Therefore, no additional amounts have been recorded for those items.

As of June 30, 2014, the net amount of $58.2 million of 2015 Convertible Notes outstanding includes the $59.9 million of principal reduced by $1.7 million of the remaining unamortized discount. The remaining unamortized discount of $1.7 million will be amortized into interest expense, using the effective interest method, over the remaining life of the 2015 Convertible Notes, which mature in March 2015.  At June 30, 2014, using the conversion rate of 169.0082 shares per $1,000 principal amount of the 2015 Convertible Notes, if the $59.9 million of principal were converted into shares of common stock, the notes would convert into approximately 10.1 million shares of common stock.  As of June 30, 2014, there is no excess if-converted value to the holders of the 2015 Convertible Notes as the price of our common stock at June 30, 2014, $3.08 per share, is less than the conversion price.

For the three and six months ended June 30, 2014, the annual effective interest rate on the 2015 Convertible Notes, including the amortization of debt issue costs, was approximately 12.0%.

46

The following table is the amount of interest expense related to the 2015 Convertible Notes, disregarding capitalized interest considerations, for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
	(in thousands)
Interest expense related to the contractual interest coupon	$	1,043	$	2,777	$	2,439	$	5,555
Amortization of debt discount expense		707		1,862		1,592		3,653
Amortization of debt issue costs		187		250		426		495
Interest expense related to the 2015 Convertible Notes	$	1,937	$	4,889	$	4,457	$	9,703

$75.0 Million Secured Debt Facility

On July 6, 2011, we and our subsidiaries entered into a credit agreement with Credit Suisse and other parties (collectively the “lenders”), whereby the lenders agreed to provide a $75.0 million secured debt facility in two loan tranches to our subsidiary, BPZ E&P. The full amount available under the $75.0 million secured debt facility was drawn down by us on July 7, 2011. In April 2012, we and the lenders amended the terms of the $75.0 million secured debt facility and in May 2012, we prepaid $40.0 million of the principal balance of the $75.0 million secured debt facility. In May 2013, we prepaid the remaining principal balance of the $75.0 million secured debt facility.

Proceeds from the $75.0 million secured debt facility were utilized to pay certain fees and expenses under the $75.0 million secured debt facility, to fund a debt service reserve account under the $75.0 million secured debt facility, to reimburse certain affiliates of BPZ E&P for up to $14.0 million of capital and exploratory expenditures incurred by them in connection with the development of Block Z-1 and up to $6.0 million of capital and exploratory expenditures incurred by them in connection with the development in Block XIX in northwest Peru, and to finance BPZ E&P’s capital and exploratory expenditures in connection with the development of Block Z-1.

As a result of the prepayment of the remaining principal balance during the second quarter of 2013, we incurred $2.4 million of fees and a prepayment premium. The $2.4 million in fees and prepayment premium were recognized as a “Loss on extinguishment of debt” in the Consolidated Statement of Operations in the second quarter of 2013. Approximately $1.4 million representing the remaining unamortized debt issue costs on the loan was expensed as a “Loss on extinguishment of debt” in the Consolidated Statement of Operations when we prepaid the remaining principal in the second quarter of 2013.

As a result of the prepayment and amendment during the second quarter of 2012, we incurred $5.8 million of fees and prepayment premium and $1.1 million of debt issue costs. The $5.8 million in fees and prepayment premium were recognized as a “Loss on extinguishment of debt” in the Consolidated Statement of Operations, of which 25% was paid at the time of the amendment and prepayment and 25% being paid at the time of each of the next three quarterly interest payment dates ending in January 2013.

The $75.0 million secured debt facility, as amended, provided for an ongoing fee through July 2014 payable by BPZ E&P to the lenders, of the performance based arranger fee (the “Performance Based Arranger Fee”) whose amount is determined by the change in the price of Brent crude oil at inception of the loans and the price at each principal repayment date in accordance with the original loan principal repayment dates, subject to a 12% ceiling of the original principal amount borrowed. For further information on the Performance Based Arranger Fee, see Note-11, “Derivative Financial Instruments” and Note-13, “Fair Value Measurements and Disclosures.”

$40.0 Million Secured Debt Facility

In January 2011, we, through our subsidiaries, completed a credit agreement with Credit Suisse whereby Credit Suisse provided a $40.0 million secured debt facility to our power generation subsidiary, Empresa Eléctrica Nueva Esperanza S.R.L. On April 27, 2012, we and our subsidiaries, Empresa Eléctrica Nueva Esperanza S.R.L. and BPZ E&P, entered into a fourth amendment to the $40.0 million secured debt facility with Credit Suisse. In May 2013, we amended and restated the $40.0 million secured debt facility (which had been repaid by scheduled principal repayments to $25.5 million) by increasing the facility size and borrowing an additional $14.5 million. In September 2013, we prepaid the remaining principal balance of the $40.0 million secured debt facility.        

47

In 2013, the $14.5 million of proceeds from the amended and restated $40.0 million secured debt facility was utilized to meet our 2013 capital, exploration and development work programs as well as for general corporate purposes. In 2011, the proceeds from the $40.0 million secured debt facility were utilized to meet our 2011 capital, exploration and development work programs, and to reduce other debt obligations.

In May 2013, as a result of amending and restating the $40.0 million secured debt facility (which had been repaid by scheduled principal repayments to $25.5 million) to increase the facility size and borrowing an additional $14.5 million, we added $1.8 million of debt issue costs. The $1.8 million of new debt issue costs was combined with the remaining $0.6 million of unamortized debt issue costs and was originally planned to be amortized over the remaining term, ending in January 2015, using the effective interest method.

As a result of the prepayment of the remaining principal balance during the third quarter of 2013, we incurred $2.0 million in fees and prepayment premium. The $2.0 million in fees and prepayment premium were recognized as a “Loss on extinguishment of debt” in the Consolidated Statement of Operations in the third quarter of 2013. Approximately $1.7 million representing the remaining unamortized debt issue costs on the loan was expensed as a “Loss on extinguishment of debt” in the Consolidated Statement of Operations when we prepaid the remaining principal in the third quarter of 2013.  

The $40.0 million secured debt facility, as amended, provided for ongoing fees through July 2013 payable to Credit Suisse including a Performance Based Arranger Fee whose amount is determined by the change in the price of Brent crude oil at inception of the loan and the price at each principal repayment date in accordance with the original loan principal repayment dates, subject to a 18% ceiling of the original principal amount borrowed. For further information on the Performance Based Arranger Fee, see Note-11, “Derivative Financial Instruments” and Note-13, “Fair Value Measurements and Disclosures.”

Restricted Cash and Performance Bonds

Below is a summary of restricted cash as of June 30, 2014 and December 31, 2013:

	June 30, 2014		December 31, 2013
	(in thousands)
Performance bonds totaling $5.7 million for properties in Peru	$	3,459	$	3,459
Performance obligations and commitments for the gas-to-power site		650		650
Secured letters of credit		-		250
$40.0 million secured debt facility		1,000		1,000
Unsecured performance bond totaling $0.1 million for office lease agreement		-		-
Restricted cash	$	5,109	$	5,359
Current portion of restricted cash as of the end of the period	$	1,000	$	1,250
Long-term portion of restricted cash as of the end of the period	$	4,109	$	4,109

The $75.0 million secured debt facility we entered into in July 2011 required us to establish a $2.5 million debt service reserve account during the first 15 months the debt facility was outstanding.  After the first 15-month period, we were required to keep a balance in the debt service reserve account equal to the aggregate amount of principal and interest due on the next quarterly repayment date. The requirement was subsequently amended subject to the closing of the sale of a 49% participating interest in Block Z-1 to require the funding of the debt service reserve account related to the $75.0 million secured debt facility in the amount of outstanding principal. The remaining principal balance related to the $75.0 million secured debt facility was repaid in May 2013 utilizing the funds in the debt service reserve account related to this debt facility, bringing both the current and non-current balances to zero at June 30, 2014. The restricted cash balance related to the current and non-current portion of the $75.0 million secured debt financing was zero at December 31, 2013.

48

The $40.0 million secured debt facility we entered into in January 2011 required us to establish a $2.0 million debt service reserve account during the first 18-month period and, thereafter, to maintain a balance in the debt service reserve account equal to the aggregate amount of principal and interest payment on the $40.0 million secured debt facility due on the succeeding principal repayment date. The requirement was amended subject to the closing of the sale of a 49% participating interest in Block Z-1 to increase the funding of the debt service reserve account related to the $40.0 million secured debt facility to the amount of outstanding principal. The requirement was subsequently changed when we amended and restated the $40.0 million secured debt facility in May 2013 for us to maintain a balance in the debt service reserve account equal to the aggregate amount of principal and interest payment on the $40.0 million secured debt facility due on the succeeding principal repayment date. The remaining principal balance related to the $40.0 million secured debt facility was repaid in September 2013 utilizing $3.8 million of funds from the debt service reserve account related to this debt facility. As a result of the repayment of the remaining principal balance of the $40.0 million secured debt facility, it was agreed that the restricted cash balance would remain at $1.0 million relating to the performance based arranger fee for the $75.0 million secured debt facility through July 2014. Therefore the restricted cash balance related to the current and non-current portion of the $40.0 million secured debt financing was $1.0 million and zero, respectively, at June 30, 2014. The restricted cash related to the current and non-current portion of the $40.0 million secured debt financing was $1.0 million and zero, respectively, at December 31, 2013. In July 2014 the $1.0 million was released to us and the debt service reserve account was terminated.

All of the performance and insurance bonds are issued by Peruvian banks and their terms are governed by the corresponding license contracts, customs laws, legal requirements or rental practices. 

Revision to the 2014 Estimated Capital and Exploratory Expenditures Budget

Our $20.0 million estimated planned capital and exploratory expenditures onshore include $13.0 million for shallow drilling activities at Block XXIII as well as $7.0 million of other geological, geophysical and engineering activities.

Our 51% share of the Block Z-1 capital investments, of which $81.3 million is to be fully carried by Pacific Rubiales, is estimated at $93.0 million ($182.0 million gross). Our planned activities at Block Z-1 include $40.0 million of CX-15 developmental drilling for 6 wells, $36.0 million of Albacora developmental drilling for 4 wells plus a sidetrack, and $17.0 million for projects and engineering and other expenditures.

Our total estimated capital expenditures, excluding capitalized interest, is approximately $31.7 million. This includes $20.0 million for our three onshore blocks in which we hold 100% working interests, and $11.7 million for the capital and exploratory expenditures for offshore Block Z-1, which would be the amount that could exceed the $81.3 million carry amount available to us from Pacific Rubiales, should the estimated investments be all incurred.

Liquidity Outlook

       Our major sources of funding to date have been oil sales, equity and debt financing activities and asset sales.  With our current cash balance, current and prospective Corvina and Albacora oil development cash flow and the carry amount funding related to our 51% participating interest in Block Z-1 (See Divestiture above for additional details on the joint venture), we believe we will have sufficient capital resources to execute our planned Corvina and Albacora oil development projects and our initial onshore projects as well as service our current obligations.

On April 27, 2012, we and Pacific Rubiales executed a SPA under which we formed an unincorporated joint venture relationship with Pacific Rubiales to explore and develop the offshore Block Z-1 located in Peru, and Pacific Rubiales agreed to pay $150.0 million for a 49% participating interest in Block Z-1. Pursuant to the SPA, Pacific Rubiales agreed to fund $185.0 million of our share of capital and exploratory expenditures in Block Z-1 from the effective date of the SPA, January 1, 2012. The transaction provided for certain sale adjustments based upon the collection of revenues, the payment of expenses and income taxes attributable to the properties that took place after an effective date of January 1, 2012 and prior to the closing, which was effective on December 14, 2012. These amounts were considered settled by adjusting down the unused portion of the agreed funding amount of $185.0 million. At June 30, 2014, based on our share of 2014 Block Z-1 capital and exploratory expenditures credited against the carry amount, and the sale adjustments, the carry amount available for our portion of future capital and exploratory expenditures in Block Z-1 was $45.6 million.

During the third quarter of 2013, we closed on an offering for an aggregate of $143.8 million of 2017 Convertible Notes which amount includes the exercise of the underwriter’s option to purchase an additional $18.8 million of the 2017 Convertible Notes in addition to the original offering of $125.0 million. Net proceeds from the sale of the 2017 Convertible Notes, after deducting the discounts and commissions and any offering expenses payable by us, were approximately $124.5 million. We used the net proceeds for general corporate purposes, including funding our exploration and production efforts or other projects and to reduce or refinance our outstanding debt.

In April 2014, $26.0 million of the aggregate principal amount of the 2015 Convertible Notes were exchanged for an additional $25.0 million aggregate principal amount of 2017 Convertible Notes in a private transaction. As a result, we have $59.9 million principal amount of 2015 Convertible Notes outstanding and $168.7 million principal amount of 2017 Convertible Notes outstanding.

49

This remaining balance of the 2015 Convertible Notes will mature on March 1, 2015. We plan to repay the 2015 Convertible notes with a combination of cash on hand, cash from operations, possible asset sales or additional financings as required.

We currently have $500.0 million available under an effective shelf registration statement for debt securities, common stock, preferred stock, depositary shares and securities warrants, subscription rights, units or any combination thereof, which we may sell from time to time in one or more offerings pursuant to underwritten public offerings, negotiated transactions, at the market transactions, block trades or a combination of these methods. Potential future equity financing, if any, would be dependent on the success of alternative sources of financing such as other possible joint venture arrangements, our cash position and market conditions.

Off-Balance Sheet Arrangements

As of June 30, 2014, we had no transactions, agreements or other contractual arrangements with unconsolidated entities or financial partnerships, often referred to as special purpose entities, which generally are established for the purpose of facilitating off-balance sheet arrangements.

Critical Accounting Estimates

In our annual report on Form 10-K for the year ended December 31, 2013, we identified our most critical accounting policies. In preparing the consolidated financial statements, we make assumptions, estimates and judgments that affect the amounts reported. We periodically evaluate our estimates and judgments that are the most critical in nature which are related to oil reserves, successful efforts method of accounting, revenue recognition, impairment of long-lived assets, future dismantlement, restoration, and abandonment costs, derivative instruments, income taxes, as well as stock-based compensation. Our estimates are based on historical experience and on our future expectations that we believe are reasonable. Those estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses in the consolidated financial statements, and the disclosure of contingent assets and liabilities. Actual results are likely to differ from our current estimates and those differences may be material.

Recent Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. (“ASU”) 2014-08: Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (ASU 2014-08). ASU 2014-08 changes the criteria for reporting discontinued operations while enhancing disclosures in this area and is effective for annual and interim periods beginning after December 15, 2014. We are currently evaluating the provisions of ASU 2014-08 and assessing the impact, if any, it may have on our financial position and results of operations.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (ASU 2014-09), which creates Topic 606, Revenue from Contracts with Customers, and supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. In addition, ASU 2014-09 supersedes the cost guidance in Subtopic 605-35, Revenue Recognition—Construction-Type and Production-Type Contracts, and creates new Subtopic 340-40, Other Assets and Deferred Costs— Contracts with Customers. The core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Also, ASU 2014-09 requires enhanced financial statement disclosures over revenue recognition as part of the new accounting guidance. ASU 2014-09 is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). We are currently evaluating the provisions of ASU 2014-09 and assessing the impact, if any, it may have on our financial position and results of operations.

Disclosure Regarding Forward-Looking Statements

We caution that this document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in or incorporated by reference into this Form 10-Q which address activities, events or developments which we expect, believe or anticipate will or may occur in the future are forward-looking statements. The words “believes,” “intends,” “expects,” “anticipates,” “projects,” “estimates,” “predicts,” “plans” and similar expressions, or the negative thereof, are also intended to identify forward-looking statements. In particular, statements, expressed or implied, concerning future operating results, the ability to replace or increase reserves, or to increase production, or the ability to generate income or cash flows are by nature, forward-looking statements. These statements are based on certain assumptions and analyses made by the management of BPZ in light of its experience and its perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances. However, forward-looking statements are not guarantees of performance and no assurance can be given that these expectations will be achieved.

50

Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements include, but are not limited to, any of the following in the jurisdictions in which BPZ or its subsidiaries are doing business: market conditions, uncertainties inherent in oil and gas production operations and estimating reserves, unexpected future capital expenditures, the timing and extent of changes in commodity prices for crude oil, natural gas and related products, currency exchange rates, interest rates, inflation, the availability of goods and services, drilling and other operational risks, receipt of all required permits, successful completion and installation of new drilling platforms, successful installation and operation of the turbines for the gas-to-power project, availability of capital resources, success of our operational risk management activities, governmental relations, legislative or regulatory changes, political developments, acts of war and terrorism. A more detailed discussion on risks relating to the oil and natural gas industry and to our Company is included in our Annual Report on Form 10-K for the year ended December 31, 2013.

In light of these risks, uncertainties and assumptions, we caution the reader that these forward-looking statements are subject to risks and uncertainties, many of which are beyond our control, which could cause actual events or results to differ materially from those expressed or implied by the statements. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements. We undertake no obligations to update or revise our forward-looking statements, whether as a result of new information, future events or otherwise.

Cautionary Statement Regarding Certain Information Releases

We are aware that certain information concerning our operations and production is available from time to time from Perupetro and the Peruvian Ministry of Energy and Mines. This information is available from the websites of Perupetro and the Peruvian Ministry of Energy and Mines and may be available from other official sources of which we are unaware. This information is published by Perupetro and the Peruvian Ministry of Energy and Mines outside our control and may be published in a format different from the format we use to disclose such information, in compliance with SEC and other U.S. regulatory requirements.

Additionally, our joint venture partner in Block Z-1, Pacific Rubiales, is a Canadian public company that is not listed on a U.S. stock exchange, but is listed on the Toronto (TSX), Bolsa de Valores de Colombia (BVC) and BOVESPA stock exchanges. As such, Pacific Rubiales may be subject to different disclosure requirements than us. While Pacific Rubiales is subject to various confidentiality requirements regarding us, information concerning us, such as information concerning energy reserves, may be released by Pacific Rubiales outside of our control and may be released in a format different from the format we use to disclose such information, in compliance with SEC and other U.S. regulatory requirements.

We provide any such information in the format required, and at the times required, by the SEC and as determined to be both material and relevant by our management. We urge interested investors and third parties to consider closely the disclosure in our SEC filings, available from us at 580 Westlake Park Blvd., Suite 525, Houston, Texas 77079; Telephone: (281) 556-6200; Internet: www.bpzenergy.com. These filings can also be obtained from the SEC via the internet at www.sec.gov.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The primary objective of the following information is to provide forward-looking quantitative and qualitative information about our potential exposure to market risks. The term “market risk” refers to the risk of loss arising from adverse changes in interest rates, oil and natural gas prices and foreign currency exchange rates. The disclosures are not meant to be precise indicators of expected future losses, but rather indicators of reasonable possible losses. This forward-looking information provides indicators of how we view and manage our ongoing market risk exposures. All of our market risk sensitive instruments were entered into for purposes other than speculative trading.

Interest Rate Risk

As of June 30, 2014, we had long-term debt of approximately $152.8 million and current maturities of long-term debt of approximately $58.2 million.

During the third quarter of 2013, we closed on an offering for an aggregate of $143.8 million of 2017 Convertible Notes which amount includes the exercise of the underwriter’s option to purchase an additional $18.8 million of the 2017 Convertible Notes.

51

In February and March 2010, we closed on the private offering for an aggregate $170.9 million of 2015 Convertible Notes. In September 2013, we repurchased $85.0 million of the principal balance of the $170.9 million of the 2015 Convertible Notes. The 2015 Convertible Notes are general senior unsecured obligations of BPZ and subject us to risks related to changes in the fair value of the debt, however, due to make-whole provisions within the 2010 Indenture, our exposure to potential gains if we were to repay or refinance such debt are minimal.

In April 2014, we exchanged $26.0 million of the aggregate principal amount of the 2015 Convertible Notes for $25.0 million aggregate principal amount of additional 2017 Convertible Notes.

The fair value of our 2017 Convertible Notes and 2015 Convertible Notes as compared to the carrying value at June 30, 2014 and December 31, 2013, was as follows:

	June 30, 2014				December 31, 2013
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(in thousands)				(in thousands)
Convertible Notes, 8.5%, due October 2017, net of discount of ($15.9) million at June 30, 2014 and ($18.3) million at December 31, 2013 (1)	$	152,787	$	202,076	$	125,416	$	130,094
Convertible Notes, 6.5%, due March 2015, net of discount of ($1.7) million at June 30, 2014 and ($4.4) million at December 31, 2013 (2)		58,169		60,684		81,523		79,663

(1) We estimated the fair value of the 2017 Convertible Notes to be approximately $202.1 million and $130.1 million at June 30, 2014 and December 31, 2013, respectively, based on observed market prices for the same or similar type of debt issues.

(2) We estimated the fair value of the 2015 Convertible Notes to be approximately $60.7 million and $79.7 million at June 30, 2014 and December 31, 2013, respectively, based on observed market prices for the same or similar type of debt issues.

Commodity Price Risk

With respect to our oil and gas business, any revenues, cash flow, profitability and future rate of growth we achieve will be greatly dependent upon prevailing prices for oil and gas.  Our ability to maintain or increase our borrowing capacity and to obtain additional capital on attractive terms is also expected to be dependent on oil and gas prices.  Historically, oil and gas prices and markets have been volatile and are likely to continue to be volatile in the future.  Prices for oil and gas are subject to potentially wide fluctuations in response to relatively minor changes in supply of and demand for oil and gas, market uncertainty, and a variety of additional factors that are beyond our control.

Lower oil and natural gas prices may not only decrease our revenues on a per unit basis, but may also reduce the amount of oil and natural gas we can produce economically, if any.  A substantial or extended decline in oil and natural gas prices may materially affect our future business, financial condition, results of operations, liquidity and borrowing capacity, and may require a reduction in the carrying value of our oil and gas properties.  While our revenues may increase if prevailing oil and gas prices increase significantly, exploration and production costs and acquisition costs for additional properties and reserves may also increase.

In July 2011, we closed on a $75.0 million secured debt facility whose fee contains a performance based fee through July 2014 that is dependent on the change in oil prices from the inception date of the debt agreement and the price of oil at each principal repayment date. This performance based payment is subject to certain maximum limitations; however, this performance based fee exposes us to commodity price risk and may limit our ability to fully receive potential gains if oil prices increase above the price of oil at the inception of the debt agreement.

With respect to our planned electricity generation business, the price we can obtain from the sale of electricity through our proposed power plant may not rise at the same rate, or may not rise at all, to match a rise in the cost of production and transportation of our gas reserves which will be used to generate the electricity.  Prices for electricity in Peru have been volatile in the past and may be volatile in the future.  However, gas prices for gas sourced in Peru are regulated and therefore not volatile.

Foreign Currency Exchange Rate Risk

The U.S. Dollar is the functional currency for our operations in both Peru and Ecuador.  Ecuador has adopted the U.S. Dollar as its official currency.  Peru, however, uses its local currency, the Nuevo Sol, in addition to the U.S. Dollar, and therefore, our financial results are subject to favorable or unfavorable fluctuations in the exchange rate and inflation in that country.  Transaction differences have been nominal to date but are expected to increase as our activities in Peru continue to escalate. 

52

For the three months ended June 30, 2014 and 2013, foreign currency gains (losses) were zero and ($0.9) million, respectively.

For the six months ended June 30, 2014 and 2013, foreign currency gains (losses) were ($0.1) million and ($1.1) million, respectively.

Foreign currency gains (losses) are included in other income (expense) in the Consolidated Statements of Operations.

We currently have no foreign currency derivative instruments outstanding. However, we may enter into foreign currency derivative instruments (such as forward contracts, costless collars or swap agreements) in the future if we determine that it is necessary to invest in such instruments in order to mitigate our foreign currency exchange risk.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as defined in Rule 13a-15(e) of the Exchange Act were effective as of the end of the period covered by this report to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Our disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

(b) Changes in Internal Control over Financial Reporting

During the quarter ended June 30, 2014, there was no change in internal control over financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

53

PART II

Item 1. Legal Proceedings

See Note-19, “Legal Proceedings,” of the Notes to Unaudited Consolidated Financial Statements included in this Form 10-Q and Item 3. of Part I of our Annual Report on Form 10-K for the year ended December 31, 2013 for a discussion of legal proceedings, which are incorporated into this Part II, Item 1. “Legal Proceedings” by reference.

Item 1A. Risk Factors

There are no material changes in our risk factors as previously described in our Annual Report on Form 10-K for the year ended December 31, 2013.

Item 6. Exhibits

31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes - Oxley Act of 2002. (Filed herewith)
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes - Oxley Act of 2002. (Filed herewith)
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002. (Filed herewith)
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002. (Filed herewith)
101.INS	XBRL Instance Document. (Filed herewith)
101.SCH	XBRL Schema Document. (Filed herewith)
101.CAL	XBRL Calculation Linkbase Document. (Filed herewith)
101.LAB	XBRL Label Linkbase Document. (Filed herewith)
101.PRE	XBRL Presentation Linkbase Document. (Filed herewith)
101.DEF	XBRL Definition Linkbase Document. (Filed herewith)

54

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	BPZ RESOURCES, INC.
Date: August 8, 2014	/s/  MANUEL PABLO ZÚÑIGA-PFLÜCKER
	Manuel Pablo Zúñiga-Pflücker
	President, Chief Executive Officer and Director

55 

EX-31

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Manuel Pablo Zúñiga-Pflücker, certify that:

1. I have reviewed this quarterly report on Form 10-Q of BPZ Resources, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules l3a—15(e) and l5d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Manuel Pablo Zúñiga-Pflücker

Manuel Pablo Zúñiga-Pflücker

President and Chief Executive Officer

August 8, 2014

EX-31

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Richard S. Menniti, certify that:

1. I have reviewed this quarterly report on Form 10-Q of BPZ Resources, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules l3a—15(e) and l5d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Richard S. Menniti

Richard S. Menniti

Chief Financial Officer

August 8, 2014

EX-32

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of BPZ Resources, Inc. (the “Company”) for the quarter ended June 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Manuel Pablo Zúñiga-Pflücker, as Chief Executive Officer of the Company, certify, pursuant to and solely for the purpose of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Manuel Pablo Zúñiga-Pflücker

Manuel Pablo Zúñiga-Pflücker

President and Chief Executive Officer

August 8, 2014

EX-32

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of BPZ Resources, Inc. (the “Company”) for the quarter ended June 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard S. Menniti, as Chief Financial Officer of the Company, certify, pursuant to and solely for the purpose of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Richard S. Menniti

Richard S. Menniti

Chief Financial Officer

August 8, 2014

XML

Note 1 - Basis of Presentation and Significant Accounting Policies (Details) (USD $) In Millions, unless otherwise specified	0 Months Ended	1 Months Ended	6 Months Ended
	Dec. 14, 2012	Apr. 27, 2012	Jun. 30, 2014 acre
Note 1 - Basis of Presentation and Significant Accounting Policies (Details) [Line Items]
Gas and Oil Area Developed and Undeveloped Gross			2,200,000
Gas and Oil Area Developed and Undeveloped Net			1,900,000
Ownership Percentage, Oil and Gas Exploration Block			10.00%
Term of Exploration Phase			7 years
SMC Ecuador Inc. [Member]
Note 1 - Basis of Presentation and Significant Accounting Policies (Details) [Line Items]
Ownership Percentage, Oil and Gas Exploration Block			10.00%
Oil Production [Member]
Note 1 - Basis of Presentation and Significant Accounting Policies (Details) [Line Items]
Term of Exploration Phase Successful			30 years
Gas Production [Member]
Note 1 - Basis of Presentation and Significant Accounting Policies (Details) [Line Items]
Term of Exploration Phase Successful			40 years
Minimum [Member]
Note 1 - Basis of Presentation and Significant Accounting Policies (Details) [Line Items]
Term of Exploration Phase, Extension			3 years
Maximum [Member] | Oil Production [Member]
Note 1 - Basis of Presentation and Significant Accounting Policies (Details) [Line Items]
Term of Exploration Phase Successful			40 years
Maximum [Member]
Note 1 - Basis of Presentation and Significant Accounting Policies (Details) [Line Items]
Term of Exploration Phase, Extension			10 years
Block Z-1 [Member]
Note 1 - Basis of Presentation and Significant Accounting Policies (Details) [Line Items]
Gas and Oil Area Developed and Undeveloped Net			600,000
Ownership Percentage, Oil and Gas Exploration Block			51.00%
Proceeds from Sale of Oil and Gas Property and Equipment		$ 150.0
Ownership Percentage Sold, Oil and Gas Exploration Block	49.00%	49.00%
Capital and Exploratory Expenditures Funding Agreement		185.0	69.9
Block XIX [Member]
Note 1 - Basis of Presentation and Significant Accounting Policies (Details) [Line Items]
Ownership Percentage, Oil and Gas Exploration Block			100.00%
Gas and Oil Area, Developed, Gross			500,000
Block XXII [Member]
Note 1 - Basis of Presentation and Significant Accounting Policies (Details) [Line Items]
Ownership Percentage, Oil and Gas Exploration Block			100.00%
Gas and Oil Area, Developed, Gross			900,000
Block XXIII [Member]
Note 1 - Basis of Presentation and Significant Accounting Policies (Details) [Line Items]
Ownership Percentage, Oil and Gas Exploration Block			100.00%
Gas and Oil Area, Developed, Gross			200,000
Ownership Percentage Sold, Oil and Gas Exploration Block		49.00%
Capital and Exploratory Expenditures Funding Agreement		$ 185.0

XML

Note 8 - Investment in Ecuador Property (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2014
Note 8 - Investment in Ecuador Property (Details) [Line Items]
Ownership Percentage, Oil and Gas Exploration Block	10.00%
Santa Elena Property [Member]
Note 8 - Investment in Ecuador Property (Details) [Line Items]
Ownership Percentage, Oil and Gas Exploration Block	10.00%
Other Commitment	$ 3.8

XML

Note 5 - Prepaid and Other Current Assets and Other Non-current Assets (Details) - Other Non-Current Assets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Other Non-Current Assets [Abstract]
Debt issue costs, net	$ 2,598	$ 3,293
Value-added tax receivable	2,036	1,772
Other non-current assets	$ 4,634	$ 5,065

XML

Note 12 - Stockholders' Equity (Details) - Stock-based Compensation Costs (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock—based compensation costs	$ 743	$ 921	$ 1,577	$ 1,603
Employee Stock-based Compensation Costs [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock—based compensation costs	565	763	1,204	1,304
Director Stock-based Compensation Costs [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock—based compensation costs	176	155	369	293
Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock—based compensation costs	$ 2	$ 3	$ 4	$ 6

XML

Note 8 - Investment in Ecuador Property (Details) - Income (Loss) from the Investment in the Ecuador Property (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Income (Loss) from the Investment in the Ecuador Property [Abstract]
Distributions received from investment in Ecuador property	$ 0	$ 250	$ 0	$ 250
Amortization of investment in Ecuador property	(9)	(34)	(17)	(81)
Income (loss) from investment in Ecuador property, net	$ (9)	$ 216	$ (17)	$ 169

XML

Note 16 - Income Tax (Details) - Source of Net Loss Before Income Tax Expense (Benefit) and Income Tax Expense (Benefit) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Source of Net Loss Before Income Tax Expense (Benefit) and Income Tax Expense (Benefit) [Abstract]
United States	$ (4,882)	$ (5,543)	$ (9,943)	$ (9,193)
Foreign	4,458	(14,474)	7,899	(23,278)
	(424)	(20,017)	(2,044)	(32,471)
United States		(322)		668
Foreign	2,125	(55)	4,075	(715)
	$ 2,125	$ (377)	$ 4,075	$ (47)

XML

Note 5 - Prepaid and Other Current Assets and Other Non-current Assets (Details) (USD $)	1 Months Ended	3 Months Ended		6 Months Ended			1 Months Ended		3 Months Ended		3 Months Ended	1 Months Ended				1 Months Ended			1 Months Ended				3 Months Ended		3 Months Ended	1 Months Ended	3 Months Ended					6 Months Ended					1 Months Ended	3 Months Ended			6 Months Ended					1 Months Ended
	May 31, 2013	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013	Sep. 30, 2013 $40 Million Secured Debt Facility [Member]	May 31, 2013 Amended and Restated Secured Debt Facility [Member] $40 Million Secured Debt Facility [Member]	Sep. 30, 2013 Retirement of Debt [Member] Convertible Notes 2015 [Member]	Apr. 30, 2013 Retirement of Debt [Member] Convertible Notes 2015 [Member]	Sep. 30, 2013 Exchange of Debt [Member] Convertible Notes 2015 [Member]	Sep. 30, 2013 $40 Million Secured Debt Facility [Member] Remaining Unamortized Debt Issue Costs [Member]	May 31, 2013 $40 Million Secured Debt Facility [Member] Additions to Debt Issue Costs [Member]	May 31, 2013 $40 Million Secured Debt Facility [Member] Original Amount Debt Issue Costs [Member]	May 31, 2013 $40 Million Secured Debt Facility [Member] Debt Issue Costs Net [Member]	May 31, 2013 $40 Million Secured Debt Facility [Member]	Sep. 30, 2013 $40 Million Secured Debt Facility [Member]	Jan. 31, 2011 $40 Million Secured Debt Facility [Member]	May 31, 2013 $75 Million Secured Debt Facility [Member] Remaining Unamortized Debt Issue Costs [Member]	May 31, 2013 $75 Million Secured Debt Facility [Member]	May 31, 2012 $75 Million Secured Debt Facility [Member]	Jul. 31, 2011 $75 Million Secured Debt Facility [Member]	Sep. 30, 2013 Convertible Notes 2015 [Member] Remaining Unamortized Debt Issue Costs [Member]	Apr. 30, 2013 Convertible Notes 2015 [Member] Remaining Unamortized Debt Issue Costs [Member]	Mar. 31, 2010 Convertible Notes 2015 [Member] Amortized As Non-Cash Interest Expense [Member]	Apr. 30, 2014 Convertible Notes 2015 [Member]	Jun. 30, 2014 Convertible Notes 2015 [Member]		Sep. 30, 2013 Convertible Notes 2015 [Member]	Jun. 30, 2013 Convertible Notes 2015 [Member]	Mar. 31, 2010 Convertible Notes 2015 [Member]	Jun. 30, 2014 Convertible Notes 2015 [Member]		Jun. 30, 2013 Convertible Notes 2015 [Member]	Dec. 31, 2013 Convertible Notes 2015 [Member]		Apr. 30, 2014 Convertible Notes 2017 [Member]	Jun. 30, 2014 Convertible Notes 2017 [Member]		Sep. 30, 2013 Convertible Notes 2017 [Member]	Jun. 30, 2014 Convertible Notes 2017 [Member]		Dec. 31, 2013 Convertible Notes 2017 [Member]		Apr. 30, 2013 Convertible Notes 2017 [Member]	Apr. 30, 2013 Remaining Unamortized Debt Issue Costs [Member]
Note 5 - Prepaid and Other Current Assets and Other Non-current Assets (Details) [Line Items]
Debt Instrument, Face Amount								$ 40,000,000								$ 25,500,000	$ 40,000,000	$ 40,000,000		$ 75,000,000		$ 75,000,000
Repayments of Debt				0	46,139,000		36,000,000													25,500,000	40,000,000
Proceeds from Issuance of Debt	14,500,000															14,500,000
Gains (Losses) on Extinguishment of Debt		(1,245,000)	(3,786,000)	(1,245,000)	(3,786,000)							(1,700,000)							(1,400,000)							(300,000)			200,000								(900,000)									(300,000)
Payments of Debt Issuance Costs													1,800,000												4,800,000						6,100,000							300,000		2,300,000
Unamortized Debt Issuance Expense														600,000	2,400,000									600,000
Convertible Debt, Noncurrent																															170,900,000							168,700,000		143,800,000	168,700,000
Debt Instrument, Repurchased Face Amount																													85,000,000
Repayments of Convertible Debt									12,200,000		72,800,000																					63,783,000									218,901,000
Amortization of Financing Costs		344,000	740,000	718,000	1,418,000																		(100,000)				187,000			250,000		426,000		495,000				157,000			292,000
Convertible Debt										26,000,000																	58,169,000	[1]			170,900,000	58,169,000	[1]		81,523,000	[1]		152,787,000	[2]		152,787,000	[2]	125,416,000	[2]	25,000,000
Value Added Tax Receivable, Noncurrent		$ 2,036,000		$ 2,036,000		$ 1,772,000

[1] The Company estimated the fair value of the 2015 Convertible Notes to be approximately $60.7 million and $79.7 million at June 30, 2014 and December 31, 2013, respectively, based on observed market prices for the same or similar types of debt issues. The fair value of the 2015 Convertible Notes is considered to be a Level 1 measurement on the fair value hierarchy.

[2] The Company estimated the fair value of the 2017 Convertible Notes to be approximately $202.1 million and $130.1 million at June 30, 2014 and December 31, 2013, respectively, based on observed market prices for the same or similar types of debt issues. The fair value of the 2017 Convertible Notes is considered to be a Level 1 measurement on the fair value hierarchy.

XML

Note 10 - Debt Obligations (Tables)

6 Months Ended

Jun. 30, 2014

Disclosure Text Block Supplement [Abstract]

Schedule of Debt [Table Text Block]

	June 30, 2014		December 31, 2013
	(in thousands)
Convertible Notes, 8.5%, due October 2017, net of discount of ($15.9) million at June 30, 2014 and ($18.3) million at December 31, 2013	$	152,787	$	125,416
Convertible Notes, 6.5%, due March 2015, net of discount of ($1.7) million at June 30, 2014 and ($4.4) million at December 31, 2013		58,169		81,523
		210,956		206,939
Less: Current maturity of long-term debt		58,169		-
Long-term debt, net	$	152,787	$	206,939

Schedule of Long-term Debt Instruments [Table Text Block]

Year
2014	$	7,170
2015		14,340
2016		14,340
2017		183,051
Total estimated remaining cash payments related to the 2017 Convertible Notes	$	218,901

Year
2014	$	1,946
2015		61,837
Total estimated remaining cash payments related to the 2015 Convertible Notes	$	63,783

Schedule of Convertible Debt Interest Expense [Table Text Block]

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
	(in thousands)
Interest expense related to the contractual interest coupon	$	3,530	$	-	$	6,585	$	-
Amortization of debt discount expense		994		-		1,953		-
Amortization of debt issue costs		157		-		292		-
Interest expense related to the 2017 Convertible Notes	$	4,681	$	-	$	8,830	$	-

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
	(in thousands)
Interest expense related to the contractual interest coupon	$	1,043	$	2,777	$	2,439	$	5,555
Amortization of debt discount expense		707		1,862		1,592		3,653
Amortization of debt issue costs		187		250		426		495
Interest expense related to the 2015 Convertible Notes	$	1,937	$	4,889	$	4,457	$	9,703

Schedule of Interest Expense [Table Text Block]

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013
	(in thousands)
Interest expense	$	6,593		$	6,652		$	13,300		$	13,569
Capitalized interest expense		(3,080	)		(2,372	)		(5,950	)		(4,991	)
Interest expense, net	$	3,513		$	4,280		$	7,350		$	8,578

XML

Note 17 - Business Segment Information (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Note 17 - Business Segment Information (Details) [Line Items]
Number of Operating Segments	1	1	1	1
Petroperu [Member]
Note 17 - Business Segment Information (Details) [Line Items]
Number of Customers	1		1

XML

Note 13 - Fair Value Measurements and Disclosures (Details) - Fair Value of Company’s Fixed Rate Debt (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014 Convertible Notes 2017 [Member]		Dec. 31, 2013 Convertible Notes 2017 [Member]		Sep. 30, 2013 Convertible Notes 2017 [Member]	Apr. 30, 2013 Convertible Notes 2017 [Member]	Jun. 30, 2014 Convertible Notes 2015 [Member]		Dec. 31, 2013 Convertible Notes 2015 [Member]		Mar. 31, 2010 Convertible Notes 2015 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Carrying Amount	$ 152,787	[1]	$ 125,416	[1]		$ 25,000	$ 58,169	[2]	$ 81,523	[2]	$ 170,900
Fair Value	$ 202,076	[1]	$ 130,094	[1]	$ 124,500		$ 60,684	[2]	$ 79,663	[2]	$ 136,300

[1] The Company estimated the fair value of the 2017 Convertible Notes to be approximately $202.1 million and $130.1 million at June 30, 2014 and December 31, 2013, respectively, based on observed market prices for the same or similar types of debt issues. The fair value of the 2017 Convertible Notes is considered to be a Level 1 measurement on the fair value hierarchy.

[2] The Company estimated the fair value of the 2015 Convertible Notes to be approximately $60.7 million and $79.7 million at June 30, 2014 and December 31, 2013, respectively, based on observed market prices for the same or similar types of debt issues. The fair value of the 2015 Convertible Notes is considered to be a Level 1 measurement on the fair value hierarchy.

XML

Note 9 - Restricted Cash and Performance Bonds (Details) (USD $)	1 Months Ended		6 Months Ended			1 Months Ended															0 Months Ended	1 Months Ended
	Jul. 31, 2011	Jan. 31, 2011	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013	Jul. 31, 2014 Subsequent Event [Member] $40 Million Secured Debt Facility [Member]	Sep. 30, 2013 Debt Reserve Account [Member] $40 Million Secured Debt Facility [Member]	May 31, 2013 $75 Million Secured Debt Facility [Member]	May 31, 2012 $75 Million Secured Debt Facility [Member]	Jun. 30, 2014 $75 Million Secured Debt Facility [Member]	Dec. 31, 2013 $75 Million Secured Debt Facility [Member]	Jul. 31, 2011 $75 Million Secured Debt Facility [Member]	Jun. 30, 2014 $40 Million Secured Debt Facility [Member]	Dec. 31, 2013 $40 Million Secured Debt Facility [Member]	Sep. 30, 2013 $40 Million Secured Debt Facility [Member]	May 31, 2013 $40 Million Secured Debt Facility [Member]	Jan. 31, 2011 $40 Million Secured Debt Facility [Member]	Jul. 31, 2011 Debt Reserve Account [Member] $75 Million Secured Debt Facility [Member]	Jan. 31, 2011 Debt Reserve Account [Member] $40 Million Secured Debt Facility [Member]	Sep. 30, 2013 Performance-based Arranger Fee [Member] $75 Million Secured Debt Facility [Member]	Dec. 14, 2012 Block Z-1 [Member]	Apr. 27, 2012 Block Z-1 [Member]
Note 9 - Restricted Cash and Performance Bonds (Details) [Line Items]
Debt Instrument, Face Amount								$ 75,000,000				$ 75,000,000			$ 40,000,000	$ 25,500,000	$ 40,000,000
Restricted Cash and Cash Equivalents			5,109,000		5,359,000													2,500,000	2,000,000
Debt Service Reserve Period	15 months	18 months
Ownership Percentage Sold, Oil and Gas Exploration Block																					49.00%	49.00%
Restricted Cash and Cash Equivalents, Current			1,000,000		1,250,000					0	0		1,000,000	1,000,000						1,000,000
Restricted Cash and Cash Equivalents, Noncurrent			4,109,000		4,109,000					0	0		0	0
Repayments of Debt			0	46,139,000			3,800,000	25,500,000	40,000,000
Decrease in Restricted Cash						$ 1,000,000

XML

Note 15 - Standby Costs (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Other Income and Expenses [Abstract]
Standby Costs	$ 0	$ 2,225,000	$ 0	$ 3,368,000

XML

Note 16 - Income Tax (Details) (USD $)	6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Income Tax Disclosure [Abstract]
Peru BLock Z-1 Statutory Income Tax Rate	22.00%
Unrecognized Tax Benefits	$ 700,000	$ 700,000
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued	$ 46,000	$ 46,000

XML

Note 13 - Fair Value Measurements and Disclosures (Details) (USD $)	Jun. 30, 2014 Fair Value, Inputs, Level 1 [Member] Convertible Notes 2017 [Member]	Dec. 31, 2013 Fair Value, Inputs, Level 1 [Member] Convertible Notes 2017 [Member]	Jun. 30, 2014 Fair Value, Inputs, Level 1 [Member] Convertible Notes 2015 [Member]	Dec. 31, 2013 Fair Value, Inputs, Level 1 [Member] Convertible Notes 2015 [Member]	Sep. 30, 2013 $40 Million Secured Debt Facility [Member]	May 31, 2013 $40 Million Secured Debt Facility [Member]	Jan. 31, 2011 $40 Million Secured Debt Facility [Member]	May 31, 2013 $75 Million Secured Debt Facility [Member]	Jul. 31, 2011 $75 Million Secured Debt Facility [Member]	Jun. 30, 2014 Convertible Notes 2017 [Member]		Dec. 31, 2013 Convertible Notes 2017 [Member]		Sep. 30, 2013 Convertible Notes 2017 [Member]	Jun. 30, 2014 Convertible Notes 2015 [Member]		Dec. 31, 2013 Convertible Notes 2015 [Member]		Mar. 31, 2010 Convertible Notes 2015 [Member]
Note 13 - Fair Value Measurements and Disclosures (Details) [Line Items]
Debt Instrument, Face Amount					$ 40,000,000	$ 25,500,000	$ 40,000,000	$ 75,000,000	$ 75,000,000
Convertible Debt, Fair Value Disclosures	$ 202,100,000	$ 130,100,000	$ 60,700,000	$ 79,700,000						$ 202,076,000	[1]	$ 130,094,000	[1]	$ 124,500,000	$ 60,684,000	[2]	$ 79,663,000	[2]	$ 136,300,000

[1] The Company estimated the fair value of the 2017 Convertible Notes to be approximately $202.1 million and $130.1 million at June 30, 2014 and December 31, 2013, respectively, based on observed market prices for the same or similar types of debt issues. The fair value of the 2017 Convertible Notes is considered to be a Level 1 measurement on the fair value hierarchy.

[2] The Company estimated the fair value of the 2015 Convertible Notes to be approximately $60.7 million and $79.7 million at June 30, 2014 and December 31, 2013, respectively, based on observed market prices for the same or similar types of debt issues. The fair value of the 2015 Convertible Notes is considered to be a Level 1 measurement on the fair value hierarchy.

XML

Accounting Policies, by Policy (Policies)

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements of BPZ Resources, Inc. and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP” or “U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The unaudited consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the interim periods presented on a basis consistent with the annual audited consolidated financial statements. All such adjustments are of a normal, recurring nature. All significant transactions between BPZ and its consolidated subsidiaries have been eliminated. Certain prior period amounts have been reclassified to conform to current year presentation. Results of operations for interim periods are not necessarily indicative of the results of operations that may be expected for the entire year. The balance sheet at December 31, 2013 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. These interim consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of the consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP” or “U.S. GAAP”) requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses in the consolidated financial statements, and the disclosure of contingent assets and liabilities. Actual results could differ from these estimates.

Estimates of crude oil reserves are the most significant of the Company’s estimates. All of the reserves data in this Form 10-Q are estimates. Reservoir engineering is a subjective process of estimating underground accumulations of crude oil and natural gas. Numerous interpretations and assumptions are made in estimating quantities of proved crude oil and natural gas reserves. The accuracy of any reserves estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. As a result, reserves estimates may be different from the quantities of crude oil and natural gas that are ultimately recovered.

Other items subject to estimates and assumptions include the carrying amounts of property, plant and equipment, including impairments and asset retirement obligations, and deferred income tax assets. Management evaluates estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic and commodity price environment. Current credit market conditions combined with volatile commodity prices have resulted in increased uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined accurately, actual results could differ significantly from management’s estimates.

Reclassification, Policy [Policy Text Block]

Reclassification 

Certain reclassifications have been made to the 2013 consolidated financial statements to conform to the 2014 presentation. These reclassifications were not material to the accompanying consolidated financial statements.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements 

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. (“ASU”) 2014-08: Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (ASU 2014-08). ASU 2014-08 changes the criteria for reporting discontinued operations while enhancing disclosures in this area and is effective for annual and interim periods beginning after December 15, 2014. The Company is currently evaluating the provisions of ASU 2014-08 and assessing the impact, if any, it may have on its financial position and results of operations.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (ASU 2014-09), which creates Topic 606, Revenue from Contracts with Customers, and supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. In addition, ASU 2014-09 supersedes the cost guidance in Subtopic 605-35, Revenue Recognition—Construction-Type and Production-Type Contracts, and creates new Subtopic 340-40, Other Assets and Deferred Costs— Contracts with Customers. The core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Also, ASU 2014-09 requires enhanced financial statement disclosures over revenue recognition as part of the new accounting guidance. ASU 2014-09 is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently evaluating the provisions of ASU 2014-09 and assessing the impact, if any, it may have on its financial position and results of operations.

XML

Note 6 - Property, Equipment and Construction in Progress (Details) (USD $)	3 Months Ended		6 Months Ended			6 Months Ended					0 Months Ended	1 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013	Jun. 30, 2014 Other Capitalized Property Plant and Equipment [Member]	Jun. 30, 2014 Development of Gas Fired Power Generation Facility in Peru [Member]	Jun. 30, 2014 Block XXIII [Member]	Jun. 30, 2014 Power Plant [Member]	Jun. 30, 2014 CX-15 Devolopment Drilling Programs [Member]	Dec. 14, 2012 Block Z-1 [Member]	Apr. 27, 2012 Block Z-1 [Member]	Jun. 30, 2014 Block Z-1 [Member]	Jun. 30, 2014 Devolopment Drilling Program - Albacora [Member]	Jun. 30, 2014 CX-15 Platform [Member]
Note 6 - Property, Equipment and Construction in Progress (Details) [Line Items]
Capitalized Exploratory Well Costs	$ 6,600,000		$ 6,600,000		$ 6,600,000
Payments to Acquire Property, Plant, and Equipment			19,243,000	5,403,000		900,000	19,300,000	13,300,000	5,100,000	32,100,000				31,000,000	900,000
Interest Costs Capitalized	3,080,000	2,372,000	5,950,000	4,991,000		500,000		800,000	4,700,000
Ownership Percentage Sold, Oil and Gas Exploration Block											49.00%	49.00%
Capital and Exploratory Expenditures Funding Agreement												$ 185,000,000	$ 69,900,000

XML

Note 3 - Receivables, Accounts Payable and Accrued Liabilities (Details) - Summary of Accounts Receivable (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts Receivable	$ 20,743	$ 21,630
Accounts receivable - joint venture	6,877	12,230
Commodity Sales [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts Receivable	9,542	2,303
Accounts Receivable - Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts Receivable	$ 4,324	$ 7,097

XML

Note 14 - Revenue (Details) - Royalty Costs (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Royalty Costs [Abstract]
Royalty costs	$ 1,383	$ 697	$ 2,554	$ 1,403

XML

Note 14 - Revenue (Tables)

6 Months Ended

Jun. 30, 2014

Oil Revenue Disclosure [Abstract]

Royalty Cost [Table Text Block]

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
	(in thousands)
Royalty costs	$	1,383	$	697	$	2,554	$	1,403
	$	1,383	$	697	$	2,554	$	1,403

XML

Note 6 - Property, Equipment and Construction in Progress (Details) - Interest And Depreciation Expense Capitalized to Construction In Progress (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Interest And Depreciation Expense Capitalized to Construction In Progress [Abstract]
Interest expense capitalized	$ 3,080	$ 2,372	$ 5,950	$ 4,991

XML

Note 11 - Derivative Financial Instruments (Details) - Reconciliation of Changes in Fair Value (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended			12 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014 Not Designated as Hedging Instrument [Member]	Dec. 31, 2013 Not Designated as Hedging Instrument [Member]
Derivative [Line Items]
Beginning fair value of derivatives			$ 30		$ 30	$ 2,984
(Gain) loss on derivatives	269	(1,277)	239	(729)	239	(242)
Cash settlements paid						(2,712)
Ending fair value of derivatives	$ 269		$ 269		$ 269	$ 30

XML

Note 10 - Debt Obligations (Details) - Debt (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2014 Convertible Notes 2017 [Member]		Dec. 31, 2013 Convertible Notes 2017 [Member]		Apr. 30, 2013 Convertible Notes 2017 [Member]	Jun. 30, 2014 Convertible Notes 2015 [Member]		Dec. 31, 2013 Convertible Notes 2015 [Member]		Mar. 31, 2010 Convertible Notes 2015 [Member]
Note 10 - Debt Obligations (Details) - Debt [Line Items]
Convertible Notes			$ 152,787	[1]	$ 125,416	[1]	$ 25,000	$ 58,169	[2]	$ 81,523	[2]	$ 170,900
	210,956	206,939
Less: Current maturity of long-term debt	58,169
Long-term debt, net	$ 152,787	$ 206,939

[1] The Company estimated the fair value of the 2017 Convertible Notes to be approximately $202.1 million and $130.1 million at June 30, 2014 and December 31, 2013, respectively, based on observed market prices for the same or similar types of debt issues. The fair value of the 2017 Convertible Notes is considered to be a Level 1 measurement on the fair value hierarchy.

[2] The Company estimated the fair value of the 2015 Convertible Notes to be approximately $60.7 million and $79.7 million at June 30, 2014 and December 31, 2013, respectively, based on observed market prices for the same or similar types of debt issues. The fair value of the 2015 Convertible Notes is considered to be a Level 1 measurement on the fair value hierarchy.

XML

Note 5 - Prepaid and Other Current Assets and Other Non-current Assets (Details) - Prepaid and Other Current Assets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Prepaid and Other Current Assets [Abstract]
Prepaid expenses and other	$ 5,660	$ 4,327
Prepaid insurance	705	1,092
Prepaid and other current assets	$ 6,365	$ 5,419

XML

Note 4 - Inventory

6 Months Ended

Jun. 30, 2014

Inventory Disclosure [Abstract]

Inventory Disclosure [Text Block]

Note 4— Inventory

Inventories consist of crude oil, tubular goods, accessories and spare parts for production equipment, stated at the lower of average cost or market.

The Company maintains crude oil inventories in storage vessels until the inventory quantities are at a sufficient level to make a delivery to the refinery in Talara.  Crude oil inventory is stated at the lower of average cost or market value. Cost is determined on a weighted average basis based on production costs.

Below is a summary of inventory as of June 30, 2014 and December 31, 2013:

	June 30, 2014		December 31, 2013
	(in thousands)
Tubular goods, accessories and spare parts	$	11,232	$	15,534
Crude oil		2,676		1,834
Inventory	$	13,908	$	17,368

	June 30, 2014		December 31, 2013
Crude oil (barrels)		42,124		24,866
Crude oil (cost per barrel)	$	63.54	$	73.77

XML

Note 10 - Debt Obligations (Details) - Debt (Parentheticals) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014 Convertible Notes 2017 [Member]	Dec. 31, 2013 Convertible Notes 2017 [Member]	Sep. 30, 2013 Convertible Notes 2017 [Member]	Jun. 30, 2014 Convertible Notes 2015 [Member]	Dec. 31, 2013 Convertible Notes 2015 [Member]	Mar. 31, 2010 Convertible Notes 2015 [Member]
Note 10 - Debt Obligations (Details) - Debt (Parentheticals) [Line Items]
Convertible Notes, Interest Rate	8.50%	8.50%		6.50%	6.50%
Convertible Notes, Discount	$ 15,900	$ 18,300	$ 14,400	$ 1,700	$ 4,400	$ 34,600

XML

Note 3 - Receivables, Accounts Payable and Accrued Liabilities (Details) - Value-added Tax Receivable (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Value-added Tax Receivable [Abstract]
Value-added tax receivable as of the beginning of the period	$ 12,262	$ 21,784
IGV accrued related to expenditures during period	4,048	12,722
IGV reduced related to sale of oil during period	(12,780)	(22,244)
Value-added tax receivable as of the end of the period	3,530	12,262
Current portion of value-added tax receivable as of the end of the period	1,494	10,490
Long-term portion of value-added tax receivable as of the end of the period	$ 2,036	$ 1,772

XML

Note 6 - Property, Equipment and Construction in Progress (Tables)

6 Months Ended

Jun. 30, 2014

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment [Table Text Block]

	June 30, 2014			December 31, 2013
	(in thousands)
Construction in progress:
Power plant and related equipment	$	88,064		$	82,928
Platforms and wells		26,258			12,505
Pipelines and processing facilities		874			846
Other		583			556
Producing properties (successful efforts method of accounting)		141,307			140,937
Producing equipment		40,209			40,209
Barge and related equipment		53,969			53,969
Office equipment, leasehold improvements and vehicles		9,155			9,122
Accumulated depletion, depreciation and amortization		(135,613	)		(123,319	)
Property, equipment and construction in progress, net	$	224,806		$	217,753

Schedule of Interest and Depreciation Expense Capitalized to Construction in Progress [Table Text Block]

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
	(in thousands)
Interest expense capitalized	$	3,080	$	2,372	$	5,950	$	4,991

XML

Note 5 - Prepaid and Other Current Assets and Other Non-current Assets (Tables)

6 Months Ended

Jun. 30, 2014

Prepaid And Other Current Assets And Other Non Current Assets Disclosure [Abstract]

Schedule of Other Current Assets [Table Text Block]

	June 30, 2014		December 31, 2013
	(in thousands)
Prepaid expenses and other	$	5,660	$	4,327
Prepaid insurance		705		1,092
Prepaid and other current assets	$	6,365	$	5,419

Schedule of Other Assets, Noncurrent [Table Text Block]

	June 30,		December 31,
	2014		2013
	(in thousands)
Debt issue costs, net	$	2,598	$	3,293
Value-added tax receivable		2,036		1,772
Other non-current assets	$	4,634	$	5,065

Schedule of Amortization of Financing Costs[Table Text Block]

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
	(in thousands)
Amortization of debt issue costs	$	344	$	740	$	718	$	1,418
	$	344	$	740	$	718	$	1,418

XML

Note 8 - Investment in Ecuador Property (Details) - Carrying Value of Investment Property (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Carrying Value of Investment Property [Abstract]
Investment in Ecuador property, net	$ 517	$ 534

XML

Note 3 - Receivables, Accounts Payable and Accrued Liabilities (Details) - Summary of Accounts Payable (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Summary of Accounts Payable [Abstract]
Accounts payable - joint venture	$ 719
Other accounts payable	1,924	3,127
Accounts payable	$ 2,643	$ 3,127

XML

Note 7 - Asset Retirement Obligation (Tables)

6 Months Ended

Jun. 30, 2014

Asset Retirement Obligation Disclosure [Abstract]

Schedule of Asset Retirement Obligations [Table Text Block]

	June 30, 2014		December 31, 2013
	(in thousands)
ARO as of the beginning of the period	$	1,564	$	2,708
Liabilities incurred during period		105		204
Accretion expense		61		238
Revisions in estimates during period		-		(1,586	)
ARO as of the end of the period	$	1,730	$	1,564

XML

Note 8 - Investment in Ecuador Property (Tables)

6 Months Ended

Jun. 30, 2014

Investment Property Disclosure [Abstract]

Schedule of Income (Expense) From Investment Property [Table Text Block]

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013
	(in thousands)
Distributions received from investment in Ecuador property	$	-		$	250		$	-		$	250
Amortization of investment in Ecuador property		(9	)		(34	)		(17	)		(81	)
Income (loss) from investment in Ecuador property, net	$	(9	)	$	216		$	(17	)	$	169

Schedule of Investment Properties Held [Table Text Block]

	June 30,		December 31,
	2014		2013
	(in thousands)
Investment in Ecuador property, net	$	517	$	534

XML

Note 3 - Receivables, Accounts Payable and Accrued Liabilities

6 Months Ended

Jun. 30, 2014

Receivables [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note 3— Receivables, Accounts Payable and Accrued Liabilities

Accounts Receivable

Below is a summary of accounts receivable as of June 30, 2014 and December 31, 2013:

	June 30, 2014		December 31, 2013
	(in thousands)
Commodity sales	$	9,542	$	2,303
Accounts receivable - joint venture		6,877		12,230
Other		4,324		7,097
Accounts receivable	$	20,743	$	21,630

At June 30, 2014 and December 31, 2013, accounts receivable other consisted of $4.3 million and $7.0 million due to the Company from the Company’s joint venture partner for services and materials provided directly to the joint venture partner.

Income Taxes Receivable

The Company’s June 30, 2014 and December 31, 2013 income tax receivable amounts were $2.0 million and $2.1 million, respectively.

Value-Added Tax Receivable

Value-added tax (referred to as “IGV” in Peru) is generally imposed on goods and services at a rate of 18% effective March 2011 and 19% in previous periods.

The Company is recovering its IGV receivable with IGV payables associated with oil sales under the normal IGV recovery process.

Activity related to the Company’s value-added tax receivable for the six months ended June 30, 2014 and the year ended December 31, 2013 is as follows:

	June 30, 2014			December 31, 2013
	(in thousands)
Value-added tax receivable as of the beginning of the period	$	12,262		$	21,784
IGV accrued related to expenditures during period		4,048			12,722
IGV reduced related to sale of oil during period		(12,780	)		(22,244	)
Value-added tax receivable as of the end of the period	$	3,530		$	12,262
Current portion of value-added tax receivable as of the end of the period	$	1,494		$	10,490
Long-term portion of value-added tax receivable as of the end of the period	$	2,036		$	1,772

See Note-5, “Prepaid and Other Current Assets and Other Non-Current Assets” for further information on the long-term portion of the value-added tax receivable.

Accounts Payable and Accrued Liabilities

Below is a summary of accounts payable as of June 30, 2014 and December 31, 2013:

	June 30, 2014		December 31, 2013
	(in thousands)
Accounts payable - joint venture	$	719	$	-
Other accounts payable		1,924		3,127
Accounts payable	$	2,643	$	3,127

The June 30, 2014 and December 31, 2013 accrued liabilities amounts were $12.5 million and $11.2 million, respectively.

XML

Note 9 - Restricted Cash and Performance Bonds (Tables)

6 Months Ended

Jun. 30, 2014

Disclosure Text Block Supplement [Abstract]

Schedule of Restricted Cash and Cash Equivalents [Table Text Block]

	June 30, 2014		December 31, 2013
	(in thousands)
Performance bonds totaling $5.7 million for properties in Peru	$	3,459	$	3,459
Performance obligations and commitments for the gas-to-power site		650		650
Secured letters of credit		-		250
$40.0 million secured debt facility		1,000		1,000
Unsecured performance bond totaling $0.1 million for office lease agreement		-		-
Restricted cash	$	5,109	$	5,359
Current portion of restricted cash as of the end of the period	$	1,000	$	1,250
Long-term portion of restricted cash as of the end of the period	$	4,109	$	4,109

XML

Note 2 - Divestiture (Details) (USD $)	0 Months Ended	1 Months Ended	6 Months Ended
	Dec. 14, 2012	Apr. 27, 2012	Jun. 30, 2014	Dec. 31, 2013
Note 2 - Divestiture (Details) [Line Items]
Other Liabilities, Current			$ 40,955,000	$ 24,494,000
Other Liabilities, Noncurrent				16,755,000
Block Z-1 [Member]
Note 2 - Divestiture (Details) [Line Items]
Proceeds from Sale of Oil and Gas Property and Equipment		150,000,000
Ownership Percentage Sold, Oil and Gas Exploration Block	49.00%	49.00%
Capital and Exploratory Expenditures Funding Agreement		185,000,000	69,900,000
Participating Interest Loans		65,000,000
Capital and Exploratory Expenditures Funding Agreement, Carrying Value			45,600,000	81,300,000
Other Liabilities, Current			40,700,000	23,900,000
Other Liabilities, Noncurrent			$ 0	$ 16,800,000

XML

Note 7 - Asset Retirement Obligation (Details) - Asset Retirement Obligations (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Asset Retirement Obligations [Abstract]
ARO	$ 1,564	$ 2,708
Liabilities incurred during period	105	204
Accretion expense	61	238
Revisions in estimates during period		(1,586)
ARO	$ 1,730	$ 1,564

XML

Note 13 - Fair Value Measurements and Disclosures (Details) - Assets and Liabilities Measured on a Recurring Basis (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Note 13 - Fair Value Measurements and Disclosures (Details) - Assets and Liabilities Measured on a Recurring Basis [Line Items]
Derivative Financial Instruments Current Liabilities	$ 269	$ 30
Fair Value, Inputs, Level 1 [Member]
Note 13 - Fair Value Measurements and Disclosures (Details) - Assets and Liabilities Measured on a Recurring Basis [Line Items]
Derivative Financial Instruments Current Liabilities	0	0
Derivative Financial Instruments Noncurrent Liabilities	0	0
Derivative Financial Instruments	0	0
Fair Value, Inputs, Level 2 [Member]
Note 13 - Fair Value Measurements and Disclosures (Details) - Assets and Liabilities Measured on a Recurring Basis [Line Items]
Derivative Financial Instruments Current Liabilities	269	30
Derivative Financial Instruments Noncurrent Liabilities	0	0
Derivative Financial Instruments	269	30
Fair Value, Inputs, Level 3 [Member]
Note 13 - Fair Value Measurements and Disclosures (Details) - Assets and Liabilities Measured on a Recurring Basis [Line Items]
Derivative Financial Instruments Current Liabilities	0	0
Derivative Financial Instruments Noncurrent Liabilities	0	0
Derivative Financial Instruments	$ 0	$ 0

XML

Consolidated Balance Sheets (Current Period Unaudited) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 67,201	$ 57,395
Accounts receivable	20,743	21,630
Income taxes receivable	1,973	2,134
Value-added tax receivable	1,494	10,490
Inventory	13,908	17,368
Restricted cash	1,000	1,250
Prepaid and other current assets	6,365	5,419
Total current assets	112,684	115,686
Property, equipment and construction in progress, net	224,806	217,753
Restricted cash	4,109	4,109
Other non-current assets	4,634	5,065
Investment in Ecuador property, net	517	534
Deferred tax asset	60,593	63,602
Total assets	407,343	406,749
Current liabilities:
Accounts payable	2,643	3,127
Accrued liabilities	12,454	11,246
Other liabilities	40,955	24,494
Accrued interest payable	4,883	5,119
Derivative financial instruments	269	30
Current maturity of long-term debt	58,169
Total current liabilities	119,373	44,016
Asset retirement obligation	1,730	1,564
Other non-current liabilities		16,755
Long-term debt, net	152,787	206,939
Total long-term liabilities	154,517	225,258
Commitments and contingencies (Note 18 and 19)
Stockholders’ equity:
Preferred stock, no par value, 25,000 authorized; none issued and outstanding	0	0
Common stock, no par value, 250,000 authorized; 118,553 and 117,526 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively	571,158	569,061
Accumulated deficit	(437,705)	(431,586)
Total stockholders’ equity	133,453	137,475
Total liabilities and stockholders’ equity	$ 407,343	$ 406,749

XML

Note 4 - Inventory (Details) - Inventory (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Inventory [Abstract]
Tubular goods, accessories and spare parts	$ 11,232	$ 15,534
Crude oil	2,676	1,834
Inventory	$ 13,908	$ 17,368
Crude oil (barrels) (in Dollars per Barrel (of Oil))	42,124	24,866
Crude oil (cost per barrel) (in Dollars per Barrel (of Oil))	63.54	73.77

XML

Note 1 - Basis of Presentation and Significant Accounting Policies

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block]

Note 1 - Basis of Presentation and Significant Accounting Policies

Organization

BPZ Resources, Inc., (together with its subsidiaries, collectively referred to as the “Company” or “BPZ” unless the context requires otherwise) a Texas corporation, is based in Houston, Texas with offices in Lima, Peru and Quito, Ecuador. The Company is focused on the exploration, development and production of oil and natural gas in Peru, and to a lesser extent, Ecuador. The Company also intends to utilize part of its planned future natural gas production as a supply source for the complementary development of a gas-fired power generation facility which is expected to be wholly- or partially-owned by the Company, or may be wholly-owned by a third party.

The Company maintains a subsidiary, BPZ Exploración & Producción S.R.L. (“BPZ E&P”), registered in Peru through its wholly-owned subsidiary, BPZ Energy, LLC, a Texas limited liability company, and its subsidiary, BPZ Energy International Holdings, L.P., a British Virgin Islands limited partnership. Currently, the Company, through BPZ E&P, has license contracts for oil and gas exploration and production covering a total of approximately 2.2 million gross (1.9 million net) acres, in four blocks in northwest Peru. The Company’s license contracts cover ownership of the following properties: 51% working interest in Block Z-1 (0.6 million gross acres), 100% working interest in Block XIX (0.5 million gross acres), 100% working interest in Block XXII (0.9 million gross acres) and 100% working interest in Block XXIII (0.2 million gross acres). The Block Z-1 contract was signed in November 2001, the Block XIX contract was signed in December 2003 and the Blocks XXII and XXIII contracts were signed in November 2007. Generally, according to the Organic Hydrocarbon Law No. 26221 and the regulations thereunder (the “Organic Hydrocarbon Law” or “Hydrocarbon Law”), the seven-year term for the exploration phase can be extended in each contract by up to an additional three years to a maximum of ten years. However, this exploration extension is subject to government approval and specific provisions of each license contract can vary the exploration phase of the contract as established by the Hydrocarbon Law. The license contracts require the Company to conduct specified activities in the respective blocks during each exploration period in the exploration phase. If the exploration activities are successful, the Company may decide to enter the exploitation phase and the total contract term can extend up to 30 years for oil production and up to 40 years for gas production. In the event a block contains both oil and gas, as is the case in the Company’s Block Z-1 contract, the 40-year term may apply to oil production as well. The Company’s estimate of proved reserves has been prepared under the assumption that the Company’s license contract will allow production for the possible 40-year term for both oil and gas.

Additionally, through its wholly-owned subsidiary, SMC Ecuador Inc., a Delaware corporation, and its registered branch in Ecuador, the Company owns a 10% non-operating net profits interest in an oil and gas producing property, Block 2, located in the southwest region of Ecuador (the “Santa Elena Property”). In May 2013, the license agreement and operating agreement covering the property were extended from May 2016 to December 2029.

The Company is in the process of developing its Peruvian oil and gas reserves.  The Company entered commercial production for Block Z-1 in November 2010 and produces and sells oil from the Corvina and Albacora fields under the Company’s current sales contracts. The Company completed the installation of the new CX-15 platform in the Corvina field to continue the development of the field. In July 2013 the Company spudded the first development well from the new CX-15 platform. The Company also spudded a development well from the A platform in the Albacora field of Block Z-1 in September 2013. The Company spudded an exploratory well in Block XXIII in January 2014.

On December 14, 2012, Perupetro S.A (“Perupetro”), a corporation owned by the Peruvian government empowered to become a party in the contracts for the exploration and/or exploitation of hydrocarbons in order to promote these activities in Peru, approved the terms of the amendment to the Block Z-1 License Contract to recognize the sale of a 49% participating interest (“closing”) in offshore Block Z-1 to Pacific Rubiales Energy Corp. (“Pacific Rubiales”). Under the terms of the agreements signed on April 27, 2012, the Company (together with its subsidiaries) formed an unincorporated joint venture with a Pacific Rubiales subsidiary, Pacific Stratus Energy S.A., to explore and develop the offshore Block Z-1 located in Peru. Pursuant to the agreements, Pacific Rubiales agreed to pay $150.0 million for a 49% participating interest, including reserves, 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 (“carry amount”) from the effective date of the Stock Purchase Agreement (“SPA”), January 1, 2012. On December 30, 2012, the Peruvian Government signed the Supreme Decree for the execution of the amendment to the Block Z-1 License Contract.

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements of BPZ Resources, Inc. and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP” or “U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The unaudited consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the interim periods presented on a basis consistent with the annual audited consolidated financial statements. All such adjustments are of a normal, recurring nature. All significant transactions between BPZ and its consolidated subsidiaries have been eliminated. Certain prior period amounts have been reclassified to conform to current year presentation. Results of operations for interim periods are not necessarily indicative of the results of operations that may be expected for the entire year. The balance sheet at December 31, 2013 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. These interim consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

Use of Estimates

The preparation of the consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP” or “U.S. GAAP”) requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses in the consolidated financial statements, and the disclosure of contingent assets and liabilities. Actual results could differ from these estimates.

Estimates of crude oil reserves are the most significant of the Company’s estimates. All of the reserves data in this Form 10-Q are estimates. Reservoir engineering is a subjective process of estimating underground accumulations of crude oil and natural gas. Numerous interpretations and assumptions are made in estimating quantities of proved crude oil and natural gas reserves. The accuracy of any reserves estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. As a result, reserves estimates may be different from the quantities of crude oil and natural gas that are ultimately recovered.

Other items subject to estimates and assumptions include the carrying amounts of property, plant and equipment, including impairments and asset retirement obligations, and deferred income tax assets. Management evaluates estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic and commodity price environment. Current credit market conditions combined with volatile commodity prices have resulted in increased uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined accurately, actual results could differ significantly from management’s estimates.

Reclassification 

Certain reclassifications have been made to the 2013 consolidated financial statements to conform to the 2014 presentation. These reclassifications were not material to the accompanying consolidated financial statements.

Summary of Significant Accounting Policies

The Company provided a summary discussion of significant accounting policies, estimates and judgments in Note-1 to the Notes to Consolidated Financial Statements included in its Annual Report on Form 10-K for the year ended December 31, 2013. These interim financial statements should be read in conjunction with the consolidated audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

Recent Accounting Pronouncements 

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. (“ASU”) 2014-08: Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (ASU 2014-08). ASU 2014-08 changes the criteria for reporting discontinued operations while enhancing disclosures in this area and is effective for annual and interim periods beginning after December 15, 2014. The Company is currently evaluating the provisions of ASU 2014-08 and assessing the impact, if any, it may have on its financial position and results of operations.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (ASU 2014-09), which creates Topic 606, Revenue from Contracts with Customers, and supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. In addition, ASU 2014-09 supersedes the cost guidance in Subtopic 605-35, Revenue Recognition—Construction-Type and Production-Type Contracts, and creates new Subtopic 340-40, Other Assets and Deferred Costs— Contracts with Customers. The core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Also, ASU 2014-09 requires enhanced financial statement disclosures over revenue recognition as part of the new accounting guidance. ASU 2014-09 is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently evaluating the provisions of ASU 2014-09 and assessing the impact, if any, it may have on its financial position and results of operations.

XML

Note 9 - Restricted Cash and Performance Bonds (Details) - Restricted Cash (Parentheticals) (USD $) In Millions, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Performance Bonds [Member]
Restricted Cash and Cash Equivalents Items [Line Items]
Performance Bond	$ 5.7	$ 5.7
$40 Million Secured Debt Facility [Member]
Restricted Cash and Cash Equivalents Items [Line Items]
Secured Debt Facility	40.0	40.0
Unsecured Performance Bond [Member]
Restricted Cash and Cash Equivalents Items [Line Items]
Performance Bond	$ 0.1	$ 0.1

XML

Note 12 - Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2014

Stockholders' Equity Note [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013
	(in thousands, except per share data)
Net loss	$	(2,549	)	$	(19,640	)	$	(6,119	)	$	(32,424	)
Shares:
Basic weighted average common shares outstanding		116,342			115,935			116,193			115,862
Incremental shares from assumed conversion of dilutive share based awards		-			-			-			-
Diluted weighted average common shares outstanding		116,342			115,935			116,193			115,862
Excluded share based awards (1) (2)		8,480			8,140			8,480			8,140
Excluded 2017 convertible debt shares (1)		42,108			-			42,108			-
Excluded 2015 convertible debt shares (1)		10,122			28,890			10,122			28,890
Basic net loss per share	$	(0.02	)	$	(0.17	)	$	(0.05	)	$	(0.28	)
Diluted net loss per share	$	(0.02	)	$	(0.17	)	$	(0.05	)	$	(0.28	)

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block]

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
	(in thousands)
Employee stock—based compensation costs	$	565	$	763	$	1,204	$	1,304
Director stock—based compensation costs		176		155		369		293
Employee stock purchase plan costs		2		3		4		6
	$	743	$	921	$	1,577	$	1,603

XML

Note 10 - Debt Obligations (Details) - Summary of Interest Expense (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Summary of Interest Expense [Abstract]
Interest expense	$ 6,593	$ 6,652	$ 13,300	$ 13,569
Capitalized interest expense	(3,080)	(2,372)	(5,950)	(4,991)
Interest expense, net	$ 3,513	$ 4,280	$ 7,350	$ 8,578

XML

Note 17 - Business Segment Information

6 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

Note 17— Business Segment Information

The Company determines and discloses its segments in accordance with ASC Topic 280, “Segment Reporting” (“ASC Topic 280”), which uses a “management” approach for determining segments. The management approach designates the internal organization that is used by management for making operating decisions and assessing performance as the source of the Company’s reportable segments. ASC Topic 280 also requires disclosures about products or services, geographic areas, and major customers. The Company’s management reporting structure provided for only one segment for the three and six months ended June 30, 2014 and 2013, respectively. Accordingly, no separate segment information is presented. In addition, the Company operates only in Peru and has only one customer for its oil production, Petroperu. The majority of the Company’s long-lived assets are located in Peru. Management does not consider its investment in Ecuador as a separate business segment.

XML

Note 13 - Fair Value Measurements and Disclosures (Tables)

6 Months Ended

Jun. 30, 2014

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

		Fair Value Measurements Using:
		Quoted		Significant
		Prices in		Other		Significant
		Active		Observable		Unobservable
	Balance Sheet	Markets		Inputs		Inputs
	Location	(Level 1)		(Level 2)		(Level 3)
		(in thousands)
June 30, 2014
Financial Liabilities
Derivative Financial Instruments
	Current Liabilities	$	-	$	269	$	-
	Non-current Liabilities		-		-		-
		$	-	$	269	$	-
December 31, 2013
Financial Liabilities
Derivative Financial Instruments
	Current Liabilities	$	-	$	30	$	-
	Non-current Liabilities		-		-		-
		$	-	$	30	$	-

Fair Value, by Balance Sheet Grouping [Table Text Block]

	June 30, 2014				December 31, 2013
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(in thousands)				(in thousands)
Convertible Notes, 8.5%, due October 2017, net of discount of ($15.9) million at June 30, 2014 and ($18.3) million at December 31, 2013 (1)	$	152,787	$	202,076	$	125,416	$	130,094
Convertible Notes, 6.5%, due March 2015, net of discount of ($1.7) million at June 30, 2014 and ($4.4) million at December 31, 2013 (2)		58,169		60,684		81,523		79,663

XML

Note 19 - Legal Proceedings

6 Months Ended

Jun. 30, 2014

Disclosure Text Block Supplement [Abstract]

Legal Matters and Contingencies [Text Block]

Note 19— Legal Proceedings

From time to time, the Company may become a party to various legal proceedings arising in the ordinary course of business. While the outcome of lawsuits cannot be predicted with certainty, the Company is not currently a party to any proceeding that it believes could have a potentially material adverse effect on its financial condition, results of operations or cash flows.

Additionally, the Company is subject to numerous laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. To the extent laws are enacted or other governmental action is taken that restricts drilling or imposes environmental protection requirements that result in increased costs to the oil and natural gas industry in general, the business and prospects of the Company could be adversely affected.

XML

Note 12 - Stockholders' Equity (Details) (USD $)	6 Months Ended		0 Months Ended	6 Months Ended	0 Months Ended	6 Months Ended	0 Months Ended	6 Months Ended			0 Months Ended	6 Months Ended		0 Months Ended			0 Months Ended		6 Months Ended		6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013	Feb. 20, 2014 Restricted Stock [Member] Officer [Member] 2007 Long-Term Incentive Compensation Plan [Member]	Jun. 30, 2014 Restricted Stock [Member] Officer [Member] 2007 Long-Term Incentive Compensation Plan [Member]	Feb. 20, 2014 Restricted Stock [Member] Director [Member] 2007 Directors' Compensation Incentive Plan [Member]	Jun. 30, 2014 Restricted Stock [Member] Director [Member] 2007 Directors' Compensation Incentive Plan [Member]	Feb. 20, 2014 Relative Performance Stock Units [Member] 2007 Long-Term Incentive Compensation Plan [Member]	Jun. 30, 2014 Relative Performance Stock Units [Member] 2007 Long-Term Incentive Compensation Plan [Member]	Jun. 30, 2014 Relative Performance Stock Units [Member] Minimum [Member]	Jun. 30, 2014 Relative Performance Stock Units [Member] Maximum [Member]	Feb. 20, 2014 Absolute Performance Stock Units [Member] 2007 Long-Term Incentive Compensation Plan [Member]	Jun. 30, 2014 Absolute Performance Stock Units [Member] 2007 Long-Term Incentive Compensation Plan [Member]	Jun. 30, 2014 Per Employee [Member] Employee Stock Purchase Plan [Member]	Jul. 01, 2014 Subsequent Event [Member]	Jun. 20, 2014 2007 Long-Term Incentive Compensation Plan [Member]	Jun. 30, 2014 2007 Long-Term Incentive Compensation Plan [Member]	Jun. 20, 2014 2007 Directors' Compensation Incentive Plan [Member]	Jun. 30, 2014 2007 Directors' Compensation Incentive Plan [Member]	Jun. 30, 2014 Employee Stock Purchase Plan [Member]	Jun. 24, 2011 Employee Stock Purchase Plan [Member]	Jun. 30, 2014 Minimum [Member] Absolute Performance Stock Units [Member]	Jun. 30, 2014 Minimum [Member]	Jun. 30, 2014 Maximum [Member] Absolute Performance Stock Units [Member]	Jun. 30, 2014 Maximum [Member]
Note 12 - Stockholders' Equity (Details) [Line Items]
Preferred Stock, Shares Authorized	25,000,000	25,000,000
Common Stock, Shares Authorized	250,000,000	250,000,000
Preferred Stock, Par or Stated Value Per Share (in Dollars per share)	$ 0
Common Stock, Par or Stated Value Per Share (in Dollars per share)	$ 0
Performance Share Units Issued, Percentage of Common Stock Granted									0.00%	200.00%											0.00%	0.00%	200.00%	200.00%
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized																12,000,000		4,000,000		2,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Additional Shares Authorized															4,000,000		1,500,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	1,921,470															4,400,000		1,800,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period			724,389		347,220		225,695				225,694
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period				3 years																		2 years		3 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value (in Dollars per share)				$ 2.16		$ 2.16		$ 2.12				$ 0.80
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period	10 years
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	0
Share-based Compensation Arrangement by Share-based Payment Award Number of Shares Authorized Per Employee Per Offering Period													2,500
Length of Offering Period																			27 months
Purchase Price Percent of Fair Value																			85.00%
Stock Issued During Period, Shares, Employee Stock Purchase Plans														3,958
Employee Stock Ownership Plan (ESOP), Weighted Average Purchase Price of Shares Purchased (in Dollars per share)														$ 2.62

XML

Note 2 - Divestiture

6 Months Ended

Jun. 30, 2014

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 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, including reserves, 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 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.

The development of Block Z-1 is subject to the terms and conditions of a Joint Operating Agreement with Pacific Rubiales that governs the legal, technical, and operating rights and obligations of the parties with respect to the operation of Block Z-1. Under the agreement, the Company is the operator and responsible for the administrative, regulatory, government and community related duties and Pacific Rubiales manages the technical and operating duties in Block Z-1. The Joint Operating Agreement will continue for the term of the License Contract and thereafter until all decommissioning obligations under the License Contract have been satisfied.

The June 30, 2014 and December 31, 2013 carry amounts were $45.6 million and $81.3 million, respectively.

At June 30, 2014 and December 31, 2013, the Company reflected $40.7 million and $23.9 million, respectively, as other current liabilities and zero and $16.8 million, respectively, as other non-current liabilities for exploratory expenditures related to Block Z-1 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.

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Preferred stock, authorized	25,000,000	25,000,000
Preferred stock, issued	0	0
Preferred stock, outstanding	0	0
Preferred stock, par value (in Dollars per share)	$ 0	$ 0
Common stock, par value (in Dollars per share)	$ 0	$ 0
Common stock, authorized	250,000,000	250,000,000
Common stock, issued	118,553,000	117,526,000
Common stock, outstanding	118,553,000	117,526,000

XML

Note 12 - Stockholders' Equity

6 Months Ended

Jun. 30, 2014

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Note 12— Stockholders’ Equity

The Company has 25,000,000 shares of preferred stock, no par value, and 250,000,000 shares of common stock, no par value, authorized for issuance.

Potentially Dilutive Securities

Basic earnings (loss) per share of common stock is computed using the weighted average number of shares of common stock outstanding during each period. The diluted earnings (loss) per share of common stock may include the effect of the Company’s shares issuable under convertible debt agreements, outstanding stock options, shares of restricted stock or performance stock units, except in periods in which there is a net loss. The following table summarizes the calculation of basic and diluted earnings (loss) per share:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013
	(in thousands, except per share data)
Net loss	$	(2,549	)	$	(19,640	)	$	(6,119	)	$	(32,424	)
Shares:
Basic weighted average common shares outstanding		116,342			115,935			116,193			115,862
Incremental shares from assumed conversion of dilutive share based awards		-			-			-			-
Diluted weighted average common shares outstanding		116,342			115,935			116,193			115,862
Excluded share based awards (1) (2)		8,480			8,140			8,480			8,140
Excluded 2017 convertible debt shares (1)		42,108			-			42,108			-
Excluded 2015 convertible debt shares (1)		10,122			28,890			10,122			28,890
Basic net loss per share	$	(0.02	)	$	(0.17	)	$	(0.05	)	$	(0.28	)
Diluted net loss per share	$	(0.02	)	$	(0.17	)	$	(0.05	)	$	(0.28	)

(1) Inclusion of the shares for these awards would have had an antidilutive effect.

(2) Inclusion of the performance share units for these awards would have had

an antidilutive effect. The actual number of performance share units earned may

range from 0% to 200%.

The following table summarizes stock-based compensation costs recognized under ASC Topic 718, “Stock Compensation,” for the three and six months ended June 30, 2014 and 2013, respectively, which are included in “General and administrative expense” on the Consolidated Statements of Operations:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
	(in thousands)
Employee stock—based compensation costs	$	565	$	763	$	1,204	$	1,304
Director stock—based compensation costs		176		155		369		293
Employee stock purchase plan costs		2		3		4		6
	$	743	$	921	$	1,577	$	1,603

Stock Option, Restricted Stock and Performance Share Plans

The Company has in effect the 2007 Long-Term Incentive Compensation Plan, as amended in 2010 and 2014 to increase the number of shares available (the “2007 LTIP”), and the 2007 Directors’ Compensation Incentive Plan (the “Directors’ Plan”). The 2007 LTIP and Directors’ Plan provide for awards of options, stock appreciation rights, restricted stock, restricted stock units, performance awards, other stock-based awards and cash-based awards to any of the Company’s officers, employees, consultants and the employees of certain of the Company’s affiliates, as well as non-employee directors. The number of shares authorized under the amended 2007 LTIP and Directors’ Plan is 12.0 million and 4.0 million, respectively, which includes an additional 4.0 million shares related to the 2007 LTIP and 1.5 million shares related to the Directors’ Plan approved by the Company’s shareholders on June 20, 2014. As of June 30, 2014, approximately 4.4 million shares remain available for future grants under the 2007 LTIP and 1.8 million shares remain available for future grants under the Directors’ Plan.

Restricted Stock Awards and Performance Stock Units

Restricted Stock

On February 20, 2014, the Company’s Board of Directors awarded 724,389 shares of restricted stock to officers and other key employees under the Company’s 2007 LTIP. The restricted stock awards generally vest on the second anniversary of the grant date, or may vest equally over three years of the grant date. For the six months ended June 30, 2014, the weighted average grant date fair value per share of the restricted stock granted was $2.16.

On February 20, 2014, the Company awarded its non-employee directors a total of 347,220 shares of restricted stock under the Directors’ Plan. The restricted stock awards generally vest on the second anniversary of the grant date. For the six months ended June 30, 2014, the weighted average grant date fair value per share of the restricted stock granted was $2.16.

Performance Stock Units

On February 20, 2014, the Company’s Board of Directors awarded 225,695 shares of performance stock units, which are referred to by the Company as Relative Performance Stock Units, to officers under the Company’s 2007 LTIP. Shares of the Company's common stock will be issued following the vesting of the Relative Performance Stock Units determined based on the level of achievement of the performance measure at the end of the performance period (from January 1, 2014 through December 31, 2016).  The actual number of shares of Company common stock to be issued at payment is measured on a three-year cumulative stock price basis relative to a selected peer group and can range from a minimum of 0% of the number of shares of Company common stock granted to a maximum of 200% of the number of shares of Company common stock granted.

Compensation expense associated with these Relative Performance Stock Units is based on the grant date fair value of a single Relative Performance Stock Unit as determined using a Monte Carlo simulation model.  As the Company intends to settle these Relative Performance Stock Units with shares of the Company’s common stock at the end of the performance period, the Relative Performance Stock Unit awards are accounted for as equity awards and the expense is calculated on the grant date and amortized over the life of the Relative Performance Stock Unit awards. The grant date fair value per share of the Relative Performance Stock Unit award granted was $2.12.

In addition, on February 20, 2014, the Company’s Board of Directors awarded 225,694 shares of performance stock units, which are referred to by the Company as Absolute Performance Stock Units, to officers under the Company’s 2007 LTIP. Shares of the Company's common stock will be issued following the vesting of the Absolute Performance Stock Units determined based on the level of achievement of the performance measure at the end of the performance period (from January 1, 2014 through December 31, 2016).  The actual number of shares of the Company common stock to be issued at payment is measured on a three-year cumulative stock price basis relative to pre-established stock price goals and can range from a minimum of 0% of the number of shares of Company common stock granted to a maximum of 200% of the number of shares of Company common stock granted.

Compensation expense associated with these Absolute Performance Stock Units is based on the grant date fair value of a single Absolute Performance Stock Unit as determined using a Monte Carlo simulation model.  As the Company intends to settle these Absolute Performance Stock Units with shares of the Company’s common stock at the end of the performance period, the Absolute Performance Stock Unit awards are accounted for as equity awards and the expense is calculated on the grant date and amortized over the life of the Absolute Performance Stock Unit awards. The grant date fair value per share of the Absolute Performance Stock Unit award granted was $0.80.

Stock Options

Incentive and non-qualified stock options issued to directors, officers, employees and consultants are typically granted at the fair market value on the date of grant. The Company’s stock options generally vest in equal annual installments over a two to three year period and expire ten years from the date of grant. There have been no stock options awarded in 2014.

Employee Stock Purchase Plan

The employee stock purchase plan, which was approved by the shareholders on June 24, 2011, provides eligible employees the opportunity to acquire shares of BPZ Resources, Inc. common stock at a discount through payroll deductions. Employees are allowed to purchase up to 2,500 shares in any one offering period (not longer than twenty-seven months), within IRS limitations and plan rules. The offering period means each period of time which common stock is offered to participants. Unless otherwise determined by the Compensation Committee, a new offering period shall commence on the first day of each calendar quarter. Generally, the purchase price for stock acquired under the plan is the lower of 85% (subject to Compensation Committee adjustment) of the fair market value of the common stock on the grant date or the fair market value of the common stock on the investment date. Under this plan, 2,000,000 common shares were reserved for issuance and purchase by eligible employees. Activity under this plan began in the first quarter of 2012. At June 30, 2014, 1,921,470 shares were available for issuance. On July 1, 2014, 3,958 shares were issued to employees at a price of $2.62 per share.    

XML

Document And Entity Information	6 Months Ended
	Jun. 30, 2014	Jul. 31, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	BPZ RESOURCES, INC.
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		118,557,328
Amendment Flag	false
Entity Central Index Key	0001023734
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Accelerated Filer
Entity Well-known Seasoned Issuer	No
Document Period End Date	Jun. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2

XML

Note 13 - Fair Value Measurements and Disclosures

6 Months Ended

Jun. 30, 2014

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 associated with the Company’s long-term assets, short-term debt and long-term debt. 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 (through July 2013), the $75.0 million secured debt facility (through July 2014) 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:
		Quoted		Significant
		Prices in		Other		Significant
		Active		Observable		Unobservable
	Balance Sheet	Markets		Inputs		Inputs
	Location	(Level 1)		(Level 2)		(Level 3)
		(in thousands)
June 30, 2014
Financial Liabilities
Derivative Financial Instruments
	Current Liabilities	$	-	$	269	$	-
	Non-current Liabilities		-		-		-
		$	-	$	269	$	-
December 31, 2013
Financial Liabilities
Derivative Financial Instruments
	Current Liabilities	$	-	$	30	$	-
	Non-current Liabilities		-		-		-
		$	-	$	30	$	-

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 and liabilities were impaired as of June 30, 2014 and December 31, 2013, 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

Debt with Fixed Interest Rates

The fair value information regarding the Company’s fixed rate debt at June 30, 2014 and December 31, 2013 is as follows:

	June 30, 2014				December 31, 2013
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(in thousands)				(in thousands)
Convertible Notes, 8.5%, due October 2017, net of discount of ($15.9) million at June 30, 2014 and ($18.3) million at December 31, 2013 (1)	$	152,787	$	202,076	$	125,416	$	130,094
Convertible Notes, 6.5%, due March 2015, net of discount of ($1.7) million at June 30, 2014 and ($4.4) million at December 31, 2013 (2)		58,169		60,684		81,523		79,663

(1) The Company estimated the fair value of the 2017 Convertible Notes to be approximately $202.1 million and $130.1 million at June 30, 2014 and December 31, 2013, respectively, based on observed market prices for the same or similar types of debt issues. The fair value of the 2017 Convertible Notes is considered to be a Level 1 measurement on the fair value hierarchy.

(2) The Company estimated the fair value of the 2015 Convertible Notes to be approximately $60.7 million and $79.7 million at June 30, 2014 and December 31, 2013, respectively, based on observed market prices for the same or similar types of debt issues. The fair value of the 2015 Convertible Notes is considered to be a Level 1 measurement on the fair value hierarchy.

XML

Note 18 - Commitments and Contingencies (Details) (USD $) In Millions, unless otherwise specified	2 Months Ended	6 Months Ended	40 Months Ended
	Feb. 28, 2011	Jun. 30, 2014	Jun. 30, 2014
Note 18 - Commitments and Contingencies (Details) [Line Items]
Value-added Tax Rate	19.00%	18.00%	18.00%
Ownership Percentage, Oil and Gas Exploration Block		10.00%	10.00%
Mining Companies [Member]
Note 18 - Commitments and Contingencies (Details) [Line Items]
Profit Sharing Percentage		8.00%	8.00%
Oil and Gas Companies [Member]
Note 18 - Commitments and Contingencies (Details) [Line Items]
Profit Sharing Percentage		5.00%	5.00%
Santa Elena Property [Member]
Note 18 - Commitments and Contingencies (Details) [Line Items]
Other Commitment		$ 3.8	$ 3.8
Ownership Percentage, Oil and Gas Exploration Block		10.00%	10.00%
Estimated Cost of Gas-to-power Project [Member]
Note 18 - Commitments and Contingencies (Details) [Line Items]
Construction and Development Costs		153.5
Estimated Cost of Power Plant [Member]
Note 18 - Commitments and Contingencies (Details) [Line Items]
Construction and Development Costs		133.5
Estimated Cost of Pipeline Construction [Member]
Note 18 - Commitments and Contingencies (Details) [Line Items]
Construction and Development Costs		$ 20.0
Power Plant [Member] | Power Transmission Lines [Member]
Note 18 - Commitments and Contingencies (Details) [Line Items]
Plant Capacity		420
Power Plant [Member]
Note 18 - Commitments and Contingencies (Details) [Line Items]
Plant Capacity		135

XML

Consolidated Statements of Operations (Unaudited) (USD $) Share data in Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Net revenue:
Oil revenue, net	$ 24,190,000	$ 12,776,000	$ 45,094,000	$ 26,057,000
Other revenue	65,000	39,000	137,000	70,000
Total net revenue	24,255,000	12,815,000	45,231,000	26,127,000
Operating and administrative expenses:
Lease operating expense	6,744,000	8,102,000	11,967,000	14,775,000
General and administrative expense	6,375,000	6,451,000	12,572,000	11,926,000
Geological, geophysical and engineering expense	1,270,000	746,000	2,091,000	1,104,000
Depreciation, depletion and amortization expense	5,503,000	7,955,000	12,115,000	14,859,000
Standby costs	0	2,225,000	0	3,368,000
Total operating and administrative expenses	19,892,000	25,479,000	38,745,000	46,032,000
Operating income (loss)	4,363,000	(12,664,000)	6,486,000	(19,905,000)
Other income (expense):
Income (loss) from investment in Ecuador property, net	(9,000)	216,000	(17,000)	169,000
Interest expense, net	(3,513,000)	(4,280,000)	(7,350,000)	(8,578,000)
Loss on extinguishment of debt	(1,245,000)	(3,786,000)	(1,245,000)	(3,786,000)
Gain (loss) on derivatives	(269,000)	1,277,000	(239,000)	729,000
Interest income	345,000	38,000	350,000	47,000
Other expense	(96,000)	(818,000)	(29,000)	(1,147,000)
Total other expense, net	(4,787,000)	(7,353,000)	(8,530,000)	(12,566,000)
Loss before income taxes	(424,000)	(20,017,000)	(2,044,000)	(32,471,000)
Income tax expense (benefit)	2,125,000	(377,000)	4,075,000	(47,000)
Net loss	$ (2,549,000)	$ (19,640,000)	$ (6,119,000)	$ (32,424,000)
Basic net loss per share (in Dollars per share)	$ (0.02)	$ (0.17)	$ (0.05)	$ (0.28)
Diluted net loss per share (in Dollars per share)	$ (0.02)	$ (0.17)	$ (0.05)	$ (0.28)
Basic weighted average common shares outstanding (in Shares)	116,342	115,935	116,193	115,862
Diluted weighted average common shares outstanding (in Shares)	116,342	115,935	116,193	115,862

XML

Note 7 - Asset Retirement Obligation

6 Months Ended

Jun. 30, 2014

Asset Retirement Obligation Disclosure [Abstract]

Asset Retirement Obligation Disclosure [Text Block]

Note 7— Asset Retirement Obligation

An obligation was recorded for the future plug and abandonment of the oil wells in the Corvina and Albacora fields in Block Z-1, and the Pampa la Gallina well in Block XIX in accordance with the provisions of ASC Topic 410, “Asset Retirement and Environmental Obligations.” ASC 410-20 requires that an asset retirement obligation (“ARO”) associated with the retirement of a tangible, long-lived asset be recognized as a liability in the period in which it is incurred and becomes determinable. Under this method, when liabilities for dismantlement and abandonment costs, excluding salvage values, are initially recorded, the carrying amount of the related oil and natural gas properties is increased. The fair value of the ARO asset and liability is measured using expected future cash outflows discounted at the Company’s credit-adjusted risk-free interest rate. Accretion of the liability is recognized each period using the interest method of allocation, and the capitalized cost is depleted using the units of production method. Should either the estimated life or the estimated abandonment costs of a property change materially upon the Company’s periodic review, a new calculation is performed using the same methodology of taking the abandonment cost and inflating it forward to its abandonment date and then discounting it back to the present using the Company’s credit-adjusted-risk-free rate. The carrying value of the ARO is adjusted to the newly calculated value, with a corresponding offsetting adjustment to the asset retirement cost. Any negative adjustment in excess of asset retirement cost is reclassified to depreciation, depletion, and amortization expense.

Activity related to the Company’s ARO for the six months ended June 30, 2014 and the year ended December 31, 2013 is as follows:

	June 30, 2014		December 31, 2013
	(in thousands)
ARO as of the beginning of the period	$	1,564	$	2,708
Liabilities incurred during period		105		204
Accretion expense		61		238
Revisions in estimates during period		-		(1,586	)
ARO as of the end of the period	$	1,730	$	1,564

The 2013 revisions in estimates are due to the change in estimates of future costs and the shift in timing of cash flows associated with expected payment of the ARO liability.  As a revision to estimated costs in 2013, the present value of the liabilities was adjusted and, as a result, the Company adjusted both the liability and capitalized asset. Any negative adjustment in excess of asset retirement cost is reclassified to depreciation, depletion, and amortization expense.

XML

Note 6 - Property, Equipment and Construction in Progress

6 Months Ended

Jun. 30, 2014

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

Note 6— Property, Equipment and Construction in Progress

Below is a summary of property, equipment and construction in progress as of June 30, 2014 and December 31, 2013:

	June 30, 2014			December 31, 2013
	(in thousands)
Construction in progress:
Power plant and related equipment	$	88,064		$	82,928
Platforms and wells		26,258			12,505
Pipelines and processing facilities		874			846
Other		583			556
Producing properties (successful efforts method of accounting)		141,307			140,937
Producing equipment		40,209			40,209
Barge and related equipment		53,969			53,969
Office equipment, leasehold improvements and vehicles		9,155			9,122
Accumulated depletion, depreciation and amortization		(135,613	)		(123,319	)
Property, equipment and construction in progress, net	$	224,806		$	217,753

The Company follows the “successful efforts” method of accounting for its costs of acquisition, exploration and development of oil and gas properties. Under this method, oil and gas lease acquisition costs and intangible drilling costs associated with exploration efforts that result in the discovery of proved reserves and costs associated with development drilling, whether or not successful, are capitalized when incurred. Capitalized costs of producing crude oil and natural gas properties, along with support equipment and facilities, are amortized to expense by the unit-of-production method based on proved developed crude oil reserves on a field-by-field basis. Certain costs of exploratory wells are capitalized pending determinations that proved reserves have been found. Exploratory well costs continue to be capitalized if the well has found a sufficient quantity of reserves to justify its completion as a producing well and the Company is making sufficient progress assessing the reserves and the economic and operating viability of the project. If the determination is dependent upon the results of planned additional wells and required capital expenditures to produce the reserves found, the drilling costs will be capitalized as long as sufficient reserves have been found to justify completion of the exploratory well and the additional wells are underway or planned. All costs related to unsuccessful exploratory wells are expensed when such wells are determined to be non-productive.

Exploratory well costs capitalized greater than one year after completion of drilling were $6.6 million as of June 30, 2014, and December 31, 2013. The exploratory well costs relate to the CX11-16X gas well that was drilled in 2007, which tested sufficient quantities of gas and is currently shut-in until such time as a market is established for selling the gas. The Company plans to use the gas from the CX11-16X well for its gas-to-power project. See Note-18, “Commitments and Contingencies” for further information on the gas-to-power project.

During the six months ended June 30, 2014, the Company incurred net capital expenditures of approximately $19.3 million associated with its development initiatives for the exploration and production of oil and natural gas reserves and the complementary development of gas-fired power generation of electricity for sale in Peru.

The capital expenditures added were approximately $13.3 million related to the exploration of Block XXIII, which included capitalized interest of $0.8 million, approximately $5.1 million of costs related to the power plant, which consisted of capitalized interest of $4.7 million, and other capital expenditures incurred of approximately $0.9 million, which included capitalized interest of $0.5 million.

The transfer of a 49% participating interest in Block Z-1 to Pacific Rubiales was effective on December 14, 2012. Pursuant to the carry agreement, Pacific Rubiales provided funding for 100% of capital expenditures for Block Z-1 of $69.9 million for the six months ended June 30, 2014. These gross capital expenditures include approximately $32.1 million related to the CX-15 development drilling program, approximately $31.0 million related to the development drilling program in Albacora and expenditures related to the CX-15 platform of approximately $0.9 million.

The following table is the amount of interest expense capitalized to construction in progress for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
	(in thousands)
Interest expense capitalized	$	3,080	$	2,372	$	5,950	$	4,991

XML

Note 18 - Commitments and Contingencies

6 Months Ended

Jun. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

Note 18— Commitments and Contingencies

Profit Sharing

The Constitution of Peru and Legislative Decree Nos. 677 and 892 give employees working in private companies engaged in activities generating income as defined by the Income Tax Law, the right to share in the company’s profits.  According to Article 3 of the United Nations International Standard Industrial Classification, BPZ E&P’s tax category is classified under the “mining companies” section, which sets the profit sharing rate at 8%. However, in Peru, the Hydrocarbon Law states, and the Supreme Court ruled, that hydrocarbons are not related to mining activities. Hydrocarbons are included under “Companies Performing Other Activities,” thus Oil and Gas Companies pay profit sharing at a rate of 5%. The 5% of income is determined by calculating a percentage of the Company’s Peruvian subsidiaries’ annual total revenues subject to income tax less the expenses required to produce revenue or maintain the source of revenues. The benefit granted by the law to employees is calculated on the basis of “income subject to taxation” per the Peruvian tax code, and not based on income (loss) before income taxes as reported under GAAP. For the three and six months ended June 30, 2014 and 2013, respectively, profit sharing expense was not material to the Company as the Company’s Peruvian subsidiaries did not have a material amount of “income subject to taxation” per the Peruvian tax code as a result of declaring commercial production in the Corvina field, which allowed certain exploration and development costs to be deductible in 2014 and 2013 that were not deductible in previous years.  The Company is subject to profit sharing expense in any year its Peruvian subsidiaries are profitable according to the Peruvian tax laws.

Gas-to-Power Project Financing

The gas-to-power project entails the planned installation of approximately 10 miles of gas pipeline from the CX-11 platform to shore, the construction of gas processing facilities and the building of an approximately 135 megawatt (“MW”) simple-cycle electric generating plant.  The power plant site is located adjacent to an existing substation and power transmission lines, which are capable of handling up to 420 MW of power. The existing substation and transmission lines are owned and operated by third parties.

The Company currently estimates the gas-to-power project will cost approximately $153.5 million, excluding capitalized interest, working capital and 18% value-added tax which will be recovered via future revenue billings. The $153.5 million includes $133.5 million for the estimated cost of the power plant and $20.0 million for the natural gas pipeline. While the Company has held initial discussions with several potential joint venture partners for the gas-to-power project in an attempt to secure additional financing and other resources for the project, the Company has not entered into any definitive agreements with a potential partner. In the event the Company is able to identify and reach an agreement with a potential joint venture partner, it may only retain a minority position in the project, or the power generation facility may be wholly owned by a third party. However, the Company, along with its Block Z-1 partner, Pacific Rubiales, expects to retain the responsibility for the construction of the pipeline as well as retain ownership of the pipeline. The Company has obtained certain permits and is in the process of obtaining additional permits to proceed with the project.

Santa Elena Field

In 2013, the Consortium, which includes the Company and three other partners, in order to extend the term of the contract from 2016 to 2029, agreed to additional work commitments to increase production in the Santa Elena field. The Company’s total share of this commitment over the remaining life of the contract is $3.8 million (the Company’s 10% non-operating net profits interest) which amount is due for the remainder of 2014 to 2028. This commitment is expected to be funded by cash on hand and cash generated from new production of the Consortium. If the Consortium does not have sufficient cash on hand, the Company may elect to make a cash contribution to the Consortium for its 10% share of the commitment. If the Company elects not to make its 10% share contribution of the commitment, it would lose its rights in the Consortium and the Contract at the Santa Elena field.

XML

Note 14 - Revenue

6 Months Ended

Jun. 30, 2014

Oil Revenue Disclosure [Abstract]

Oil Revenue Disclosure [Text Block]

Note 14 —Revenue

The oil produced is delivered by vessel to the refinery owned by the Peruvian national oil company, Petroleos del Peru - PETROPERU S.A. (“Petroperu”), in Talara, located approximately 70 miles south of the platforms.  Produced oil is kept in production inventory until inventory quantities are at a sufficient level to make a delivery to the refinery in Talara.  Although all of the Company’s oil sales are to Petroperu, it believes the loss of Petroperu as its sole customer would not materially impact the Company’s business because it could readily find other purchasers for its oil production both in Peru and throughout the world.

The Company’s revenues are reported net of royalties owed to the government of Peru. Royalties are assessed by Perupetro, as stipulated in the Block Z-1 License Contract based on production.

The following table is the amount of royalty costs related to gross revenues for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
	(in thousands)
Royalty costs	$	1,383	$	697	$	2,554	$	1,403
	$	1,383	$	697	$	2,554	$	1,403

XML

Note 10 - Debt Obligations

6 Months Ended

Jun. 30, 2014

Disclosure Text Block Supplement [Abstract]

Debt and Capital Leases Disclosures [Text Block]

Note 10— DebtObligations

At June 30, 2014 and December 31, 2013, debt consisted of the following:

	June 30, 2014		December 31, 2013
	(in thousands)
Convertible Notes, 8.5%, due October 2017, net of discount of ($15.9) million at June 30, 2014 and ($18.3) million at December 31, 2013	$	152,787	$	125,416
Convertible Notes, 6.5%, due March 2015, net of discount of ($1.7) million at June 30, 2014 and ($4.4) million at December 31, 2013		58,169		81,523
		210,956		206,939
Less: Current maturity of long-term debt		58,169		-
Long-term debt, net	$	152,787	$	206,939

Convertible Notes due 2017

During the third quarter of 2013, the Company closed on an offering for an aggregate principal amount of $143.8 million of convertible notes due 2017, which includes the exercise of the underwriter’s option to purchase an additional $18.8 million of the 2017 Convertible Notes in addition to the original offering of $125.0 million. The 2017 Convertible Notes are the Company’s general senior unsecured obligations and rank equally in right of payment with all of the Company’s other existing and future senior unsecured indebtedness and rank senior in the right of payment to all of our existing and future subordinated debt.  The 2017 Convertible Notes are effectively subordinate to any secured indebtedness the Company may have to the extent of the value of the assets collateralizing such indebtedness.  The 2017 Convertible Notes are not guaranteed by the Company’s subsidiaries. In April 2014, $26.0 million of the aggregate principal amount of the 2015 Convertible Notes were exchanged for an additional $25.0 million aggregate principal amount of 2017 Convertible Notes in a private transaction. As a result, the Company has $168.7 million principal amount of 2017 Convertible Notes outstanding at June 30, 2014.

The interest rate on the 2017 Convertible Notes is 8.50% per year with interest payments due on April 1st and October 1st of each year.  The 2017 Convertible Notes mature with repayment of the $168.7 million principal amount (assuming no conversion) on October 1, 2017 (the “2017 Maturity Date”).

The conversion rate is 249.5866 shares per $1,000 principal amount (equal to an initial conversion price of approximately $4.0066 per share of common stock). Upon conversion, if conversion is elected by the noteholders, the Company must deliver, at its option, either (1) a number of shares of its common stock determined as set forth in the Indenture agreement dated September 24, 2013 (the “2013 Indenture”), (2) cash, or (3) a combination of cash and shares of its common stock.

Holders may convert their 2017 Convertible Notes at their option at any time prior to the close of business on the second business day immediately preceding the 2017 Maturity Date under any of the following circumstances:

(1) during any fiscal quarter (and only during such fiscal quarter) commencing after October 1, 2013, if the last reported sale price of the Company’s common stock is greater than or equal to 130% of the conversion price of the 2017 Convertible Notes for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter;

(2) prior to July 1, 2017, during the five business-day period after any ten consecutive trading-day period in which the trading price of $1,000 principal amount of the 2017 Convertible Notes for each trading day in the measurement period was less than 97% of the product of the last reported sale price of the Company’s common stock and the conversion rate on such trading day; or

(3) upon the occurrence of one of a specified number of corporate transactions.

Holders may also convert the 2017 Convertible Notes at their option at any time beginning on July 1, 2017, and ending at the close of business on the second business day immediately preceding the 2017 Maturity Date or may hold the 2017 Convertible Notes to maturity and be paid their outstanding principal in cash.

The Company may not redeem the 2017 Convertible Notes prior to the 2017 Maturity Date.

If the Company experiences any one of certain specified types of corporate transactions, holders may require the Company to purchase all or a portion of their 2017 Convertible Notes. Any repurchase of the 2017 Convertible Notes pursuant to these provisions will be for cash at a price equal to 100% of the principal amount of the notes to be purchased plus any accrued and unpaid interest to, but excluding, the purchase date.

The 2013 Indenture for the 2017 Convertible Notes contains customary terms and covenants and events of default, the occurrence and continuation of which could result in the acceleration of amounts due under the 2017 Convertible Notes.

Net proceeds from the sale of the 2017 Convertible Notes, after deducting the discounts and commissions and any offering expenses payable by the Company, were approximately $124.5 million.  The 2017 Convertible Notes were issued with a 10% discount or $14.4 million. The underwriter received commissions of approximately $4.3 million in connection with the sale and the Company incurred $0.6 million of direct expenses in connection with the offering.  The Company used the net proceeds for general corporate purposes, including funding its exploration and production efforts, other projects and to reduce or refinance its outstanding debt.

The Company accounts for the 2017 Convertible Notes in accordance with ASC Topic 470, “Debt”, as it pertains to accounting for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement). Under the accounting guidance, convertible debt instruments that may be settled entirely or partially in cash upon conversion are required to be separated into liability and equity components, with the liability component amount determined in a manner that reflects the issuer’s non-convertible debt borrowing rate. The value assigned to the liability component is determined by measuring the fair value of a similar liability that does not have an equity conversion feature. The value assigned to the equity component is determined by deducting the fair value of the liability component from the initial proceeds. The excess of the principal amount of the liability component over its carrying amount (the non-cash discount) is amortized to interest cost using the effective interest method over the term of the 2017 Convertible Notes. In addition, transaction costs incurred that directly relate to the issuance of convertible debt instruments must be allocated to the liability and equity components in proportion to the allocation of proceeds and accounted for as debt issuance costs and equity issuance costs, respectively.

The Company estimated its non-convertible borrowing rate at the date of issuance of the 2017 Convertible Notes to be 12.9%. The 12.9% non-convertible borrowing rate represented the borrowing rate of similar companies with the same credit quality as the Company and was obtained through a quote from the underwriter. Using the income method and discounting the principal and interest payments of the 2017 Convertible Notes using the 12.9% non-convertible borrowing rate, the Company estimated the fair value of the $143.8 million 2017 Convertible Notes to be approximately $124.5 million, with the discount being approximately $19.3 million. The discount of $19.3 million includes the 10% discount of $14.4 million and the value of the equity component of $4.9 million. The discount is being amortized as non-cash interest expense over the life of the 2017 Convertible Notes using the effective interest method. In addition, the Company allocated approximately $2.3 million of the $4.9 million of fees and commissions as debt issue costs that are being amortized as non-cash interest expense over the life of the notes using the effective interest method. Approximately $0.1 million of fees and commissions were treated as transaction costs associated with the equity component and the remaining $2.5 million was expensed to other expense under the caption “Other income (expense)” in the third quarter of 2013.

As a result of the exchange during the second quarter of 2014, the Company estimated its non-convertible borrowing rate at the date of issuance of the $25.0 million 2017 Convertible Notes to be 7.89%. The 7.89% non-convertible borrowing rate represented the borrowing rate of similar companies with the same credit quality as the Company and was obtained through a quote from a financial advisor. Using the income method and discounting the principal and interest payments of the 2017 Convertible Notes with the 7.89% non-convertible borrowing rate, the Company estimated the fair value of the $25.0 million 2017 Convertible Notes to be approximately $25.4 million, with the premium being approximately $0.4 million. The value of the equity component was estimated at $0.5 million. The premium is being amortized as non-cash interest expense over the life of the 2017 Convertible Notes using the effective interest method. In addition, approximately $0.3 million of fees were considered debt issue costs that are being amortized as a non-cash interest expense over the life of the notes using the effective interest method. The Company recognized a loss on this transaction of approximately $0.9 million and this loss was included in the “Loss on extinguishment of debt” in the consolidated statement of operations in the second quarter of 2014. For further information on debt issue costs see Note-5, “Prepaid and Other Current Assets and Other Non-Current Assets.”

The following table is the estimated remaining cash payments as of June 30, 2014, including interest payments related to the 2017 Convertible Notes, assuming no conversion (in thousands):

Year
2014	$	7,170
2015		14,340
2016		14,340
2017		183,051
Total estimated remaining cash payments related to the 2017 Convertible Notes	$	218,901

The Company evaluated the 2013 Indenture for the 2017 Convertible Notes for potential embedded derivatives, noting that the conversion feature and make-whole provisions did not meet the embedded derivative criteria as set forth in ASC Topic 815, “Derivatives and Hedging”. Therefore, no additional amounts have been recorded for those items.

As of June 30, 2014, the net amount of $152.8 million includes the $168.7 million of principal reduced by $15.9 million of the remaining unamortized discount. The remaining unamortized discount of $15.9 million will be amortized into interest expense, using the effective interest method, over the remaining life of the 2017 Convertible Notes, which mature in October 2017.  At June 30, 2014, using the conversion rate of 249.5866 shares per $1,000 principal amount of the 2017 Convertible Notes, if the $168.7 million of principal were converted into shares of common stock, the notes would convert into approximately 42.1 million shares of common stock.  As of June 30, 2014, there is no excess if-converted value to the holders of the 2017 Convertible Notes as the price of the Company’s common stock at June 30, 2014, $3.08 per share, is less than the conversion price.

The annual effective interest rate on the 2017 Convertible Notes, including the amortization of debt issue costs, is approximately 12.5%.

The following table is the amount of interest expense related to the 2017 Convertible Notes, disregarding capitalized interest considerations, for the three and six months ended June 30, 2014 and 2013, respectively:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
	(in thousands)
Interest expense related to the contractual interest coupon	$	3,530	$	-	$	6,585	$	-
Amortization of debt discount expense		994		-		1,953		-
Amortization of debt issue costs		157		-		292		-
Interest expense related to the 2017 Convertible Notes	$	4,681	$	-	$	8,830	$	-

Convertible Notes due 2015

During the first quarter of 2010, the Company closed on a private offering for an aggregate principal amount of $170.9 million of convertible notes due 2015. The 2015 Convertible Notes are the Company’s general senior unsecured obligations and rank equally in right of payment with all of the Company’s other existing and future senior unsecured indebtedness.  The 2015 Convertible Notes are subordinate to all of the Company’s secured indebtedness to the extent of the value of the assets collateralizing such indebtedness.  The 2015 Convertible Notes are not guaranteed by the Company’s subsidiaries. In September 2013, the Company repurchased $85.0 million of the aggregate principal amount of the $170.9 million 2015 Convertible Notes, leaving a principal balance of $85.9 million. In April 2014, $26.0 million of the aggregate principal amount of the 2015 Convertible Notes were exchanged for an additional $25.0 million aggregate principal amount of 2017 Convertible Notes in a private transaction. As a result, the Company has $59.9 million principal amount of 2015 Convertible Notes outstanding at June 30, 2014.

The interest rate on the 2015 Convertible Notes is 6.50% per year with interest payments due on March 1st and September 1st of each year.  The 2015 Convertible Notes mature with repayment of the remaining principal balance of $59.9 million (assuming no conversion) on March 1, 2015 (the “2015 Maturity Date”).

The initial conversion rate of 148.3856 shares per $1,000 principal amount (equal to an initial conversion price of approximately $6.74 per share of common stock) was adjusted on February 3, 2011 in accordance with the terms of the Indenture agreement dated February 8, 2010 (the “2010 Indenture”). As a result, the conversion rate and conversion price changed to 169.0082 shares per $1,000 principal amount and $5.9169 per share of common stock, respectively. Upon conversion, if conversion is elected by the noteholders, the Company must deliver, at its option, either (1) a number of shares of its common stock determined as set forth in the 2010 Indenture, (2) cash, or (3) a combination of cash and shares of its common stock.

Holders may convert their 2015 Convertible Notes at their option at any time prior to the close of business on the second business day immediately preceding the 2015 Maturity Date under any of the following circumstances:

(1) during any fiscal quarter (and only during such fiscal quarter) commencing after March 31, 2010, if the last reported sale price of the Company’s common stock is greater than or equal to 130% of the conversion price of the 2015 Convertible Notes for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter;

(2) prior to January 1, 2015, during the five business-day period after any ten consecutive trading-day period in which the trading price of $1,000 principal amount of the 2015 Convertible Notes for each trading day in the measurement period was less than 97% of the product of the last reported sale price of the Company’s common stock and the conversion rate on such trading day;

(3) if the 2015 Convertible Notes have been called for redemption; or

(4) upon the occurrence of one of a specified number of corporate transactions.

Holders may also convert the 2015 Convertible Notes at their option at any time beginning on February 1, 2015, and ending at the close of business on the second business day immediately preceding the 2015 Maturity Date or may hold the 2015 Convertible Notes to maturity and be paid their outstanding principal in cash.

As of February 3, 2013, the Company may redeem for cash all or a portion of the 2015 Convertible Notes at a redemption price of 100% of the principal amount of the notes to be redeemed plus any accrued and unpaid interest to, but not including, the redemption date, plus a “make-whole” payment if: (1) for at least 20 trading days in any consecutive 30 trading days ending within 5 trading days immediately before the date the Company mails the redemption notice, the “last reported sale price” of its common stock exceeded 175% of the conversion price in effect on that trading day, and (2) there is no continuing default with respect to the notes that has not been cured or waived on or before the redemption date.

If the Company experiences any one of certain specified types of corporate transactions, holders may require the Company to purchase all or a portion of their 2015 Convertible Notes. Any repurchase of the 2015 Convertible Notes pursuant to these provisions will be for cash at a price equal to 100% of the principal amount of the notes to be purchased plus any accrued and unpaid interest to, but excluding, the purchase date.

The 2010 Indenture for the 2015 Convertible Notes contains customary terms and covenants and events of default, the occurrence and continuation of which could result in the acceleration of amounts due under the 2015 Convertible Notes.

Net proceeds from the sale of the $170.9 million of 2015 Convertible Notes, after deducting the discounts and commissions and any offering expenses payable by the Company, were approximately $164.9 million.  The initial purchaser received commissions of approximately $5.5 million in connection with the sale and the Company incurred approximately $0.6 million of direct expenses in connection with the offering.  The Company used the net proceeds for general corporate purposes, including capital expenditures and working capital, reduction or refinancing of debt, and other corporate obligations.

The Company accounts for the 2015 Convertible Notes in accordance with ASC Topic 470, “Debt,” as it pertains to accounting for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement). Under the accounting guidance, convertible debt instruments that may be settled entirely or partially in cash upon conversion are required to be separated into liability and equity components, with the liability component amount determined in a manner that reflects the issuer’s non-convertible debt borrowing rate. The value assigned to the liability component is determined by measuring the fair value of a similar liability that does not have an equity conversion feature. The value assigned to the equity component is determined by deducting the fair value of the liability component from the initial proceeds. The excess of the principal amount of the liability component over its carrying amount (the non-cash discount) is amortized to interest cost using the effective interest method over the term of the 2015 Convertible Notes. In addition, transaction costs incurred that directly relate to the issuance of convertible debt instruments must be allocated to the liability and equity components in proportion to the allocation of proceeds and accounted for as debt issuance costs and equity issuance costs, respectively.

The Company estimated its non-convertible borrowing rate at the date of issuance of the 2015 Convertible Notes to be 12%. The 12% non-convertible borrowing rate represented the borrowing rate of similar companies with the same credit quality as the Company and was obtained through a quote from the initial purchaser. Using the income method and discounting the principal and interest payments of the 2015 Convertible Notes using the 12% non-convertible borrowing rate, the Company estimated the fair value of the $170.9 million 2015 Convertible Notes to be approximately $136.3 million with the discount being approximately $34.6 million. The discount is being amortized as non-cash interest expense over the life of the notes using the effective interest method. In addition, the Company allocated approximately $4.8 million of the $6.1 million of fees and commissions as debt issue costs that are being amortized as non-cash interest expense over the life of the 2015 Convertible Notes using the effective interest method. The remaining $1.3 million of fees and commissions were treated as transaction costs associated with the equity component. The net amount of the equity component was $33.3 million, which included the initial discount of $34.6 million reduced by $1.3 million of direct transaction costs.

In September 2013, the Company repurchased $85.0 million of aggregate principal amount of the 2015 Convertible Notes. As a result of the $85.0 million repurchase during the third quarter of 2013, approximately $12.2 million of the repayment was considered a retirement of debt and the remaining $72.8 million of the repayment was considered an exchange of debt and not deemed a substantial modification of debt. The $85.0 million of 2015 Convertible Notes were repurchased with an approximate discount of 10%. The Company recognized a gain on the retirement of the debt of approximately $0.2 million and this gain was included in the “Loss on extinguishment of debt” in the consolidated statement of operations in the third quarter of 2013. For further information on debt issue costs see Note-5, “Prepaid and Other Current Assets and Other Non-Current Assets.”

As a result of the exchange during the second quarter of 2014, the $26.0 million of aggregate principal amount of 2015 Convertible Notes exchanged was considered a retirement of debt and deemed a substantial modification of debt. The $26.0 million of 2015 Convertible Notes were exchanged with an approximate discount of 4%. The Company recognized a loss on the retirement of the debt of approximately $0.3 million and this loss was included in the “Loss on extinguishment of debt” in the consolidated statement of operations in the second quarter of 2014. For further information on debt issue costs see Note-5, “Prepaid and Other Current Assets and Other Non-Current Assets.”

The following table is the estimated remaining cash payments as of June 30, 2014, including interest payments related to the 2015 Convertible Notes, assuming no conversion (in thousands):

Year
2014	$	1,946
2015		61,837
Total estimated remaining cash payments related to the 2015 Convertible Notes	$	63,783

The Company evaluated the 2010 Indenture for the 2015 Convertible Notes for potential embedded derivatives, noting that the conversion feature and make-whole provisions did not meet the embedded derivative criteria as set forth in ASC Topic 815, “Derivatives and Hedging.” Therefore, no additional amounts have been recorded for those items.

As of June 30, 2014, the net amount of $58.2 million of 2015 Convertible Notes outstanding includes the $59.9 million of principal reduced by $1.7 million of the remaining unamortized discount. The remaining unamortized discount of $1.7 million will be amortized into interest expense, using the effective interest method, over the remaining life of the 2015 Convertible Notes, which mature in March 2015.  At June 30, 2014, using the conversion rate of 169.0082 shares per $1,000 principal amount of the 2015 Convertible Notes, if the $59.9 million of principal were converted into shares of common stock, the notes would convert into approximately 10.1 million shares of common stock.  As of June 30 2014, there is no excess if-converted value to the holders of the 2015 Convertible Notes as the price of the Company’s common stock at June 30, 2014, $3.08 per share, is less than the conversion price.

For the three and six months ended June 30, 2014, the annual effective interest rate on the 2015 Convertible Notes, including the amortization of debt issue costs, was approximately 12.0%.

The following table is the amount of interest expense related to the 2015 Convertible Notes, disregarding capitalized interest considerations, for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
	(in thousands)
Interest expense related to the contractual interest coupon	$	1,043	$	2,777	$	2,439	$	5,555
Amortization of debt discount expense		707		1,862		1,592		3,653
Amortization of debt issue costs		187		250		426		495
Interest expense related to the 2015 Convertible Notes	$	1,937	$	4,889	$	4,457	$	9,703

$75.0 Million Secured Debt Facility

On July 6, 2011, the Company and its subsidiaries entered into a credit agreement with Credit Suisse and other parties (collectively the “lenders”), whereby the lenders agreed to provide a $75.0 million secured debt facility in two loan tranches to the Company’s subsidiary, BPZ E&P. The full amount available under the $75.0 million secured debt facility was drawn down by the Company on July 7, 2011. In April 2012, the Company and the lenders amended the terms of the $75.0 million secured debt facility and in May 2012, the Company prepaid $40.0 million of the principal balance of the $75.0 million secured debt facility. In May 2013, the Company prepaid the remaining principal balance of the $75.0 million secured debt facility.

Proceeds from the $75.0 million secured debt facility were utilized to pay certain fees and expenses under the $75.0 million secured debt facility, to fund a debt service reserve account under the $75.0 million secured debt facility, to reimburse certain affiliates of BPZ E&P for up to $14.0 million of capital and exploratory expenditures incurred by them in connection with the development of Block Z-1 and up to $6.0 million of capital and exploratory expenditures incurred by them in connection with the development in Block XIX in northwest Peru, and to finance BPZ E&P’s capital and exploratory expenditures in connection with the development of Block Z-1.

As a result of the prepayment of the remaining principal balance during the second quarter of 2013, the Company incurred $2.4 million of fees and a prepayment premium. The $2.4 million in fees and prepayment premium were recognized as a “Loss on extinguishment of debt” in the Consolidated Statement of Operations in the second quarter of 2013. Approximately $1.4 million representing the remaining unamortized debt issue costs on the loan was expensed as a “Loss on extinguishment of debt” in the Consolidated Statement of Operations when the Company prepaid the remaining principal in the second quarter of 2013.

As a result of the prepayment and amendment during the second quarter of 2012, the Company incurred $5.8 million of fees and prepayment premium and $1.1 million of debt issue costs. The $5.8 million in fees and prepayment premium were recognized as a “Loss on extinguishment of debt” in the Consolidated Statement of Operations, of which 25% was paid at the time of the amendment and prepayment and 25% was paid at the time of each of the next three quarterly interest payment dates ending in January 2013.

The $75.0 million secured debt facility, as amended, provided for an ongoing fee through July 2014 payable by BPZ E&P to the lenders, of the Performance Based Arranger Fee whose amount is determined by the change in the price of Brent crude oil at inception of the loans and the price at each principal repayment date in accordance with the original loan principal repayment dates, subject to a 12% ceiling of the original principal amount borrowed. For further information on the Performance Based Arranger Fee, see Note-11, “Derivative Financial Instruments” and Note-13, “Fair Value Measurements and Disclosures.”

$40.0 Million Secured Debt Facility

In January 2011, the Company, through its subsidiaries, completed a credit agreement with Credit Suisse whereby Credit Suisse provided a $40.0 million secured debt facility to the Company’s power generation subsidiary, Empresa Eléctrica Nueva Esperanza S.R.L. On April 27, 2012, the Company and its subsidiaries, Empresa Eléctrica Nueva Esperanza S.R.L. and BPZ E&P, entered into a fourth amendment to the $40.0 million secured debt facility with Credit Suisse. In May 2013, the Company amended and restated the $40.0 million secured debt facility (which had been repaid by scheduled principal repayments to $25.5 million) by increasing the facility size and borrowing an additional $14.5 million. In September 2013, the Company prepaid the remaining principal balance of the $40.0 million secured debt facility.    

In 2013, the $14.5 million of proceeds from the amended and restated $40.0 million secured debt facility was utilized to meet the Company’s 2013 capital, exploration and development work programs as well as for general corporate purposes. In 2011, the proceeds from the $40.0 million secured debt facility were utilized to meet the Company’s 2011 capital, exploration and development work programs, and to reduce other debt obligations.

In May 2013, as a result of amending and restating the $40.0 million secured debt facility (which had been repaid by scheduled principal repayments to $25.5 million) to increase the facility size and borrowing an additional $14.5 million, the Company added $1.8 million of debt issue costs. The $1.8 million of new debt issue costs was combined with the remaining $0.6 million of unamortized debt issue costs and was originally planned to be amortized over the remaining term, ending in January 2015, using the effective interest method.

As a result of the prepayment of the remaining principal balance during the third quarter of 2013, the Company incurred $2.0 million in fees and prepayment premium. The $2.0 million in fees and prepayment premium were recognized as a “Loss on extinguishment of debt” in the Consolidated Statement of Operations in the third quarter of 2013. Approximately $1.7 million representing the remaining unamortized debt issue costs on the loan was expensed as a “Loss on extinguishment of debt” in the Consolidated Statement of Operations when the Company prepaid the remaining principal in the third quarter of 2013.

The $40.0 million secured debt facility, as amended, provided for ongoing fees through July 2013 payable to Credit Suisse including a Performance Based Arranger Fee whose amount is determined by the change in the price of Brent crude oil at inception of the loan and the price at each principal repayment date in accordance with the original loan principal repayment dates, subject to a 18% ceiling of the original principal amount borrowed. For further information on the Performance Based Arranger Fee, see Note-11, “Derivative Financial Instruments” and Note-13, “Fair Value Measurements and Disclosures.” 

Interest Expense

The following table is a summary of interest expense for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013
	(in thousands)
Interest expense	$	6,593		$	6,652		$	13,300		$	13,569
Capitalized interest expense		(3,080	)		(2,372	)		(5,950	)		(4,991	)
Interest expense, net	$	3,513		$	4,280		$	7,350		$	8,578

XML

Note 10 - Debt Obligations (Details) (USD $)	1 Months Ended	3 Months Ended		6 Months Ended				3 Months Ended	0 Months Ended	41 Months Ended	3 Months Ended	0 Months Ended				3 Months Ended	1 Months Ended		3 Months Ended						1 Months Ended	3 Months Ended						6 Months Ended		17 Months Ended	3 Months Ended		3 Months Ended						3 Months Ended		3 Months Ended		1 Months Ended	3 Months Ended			6 Months Ended					3 Months Ended				1 Months Ended	3 Months Ended				6 Months Ended		17 Months Ended									1 Months Ended		3 Months Ended	6 Months Ended			1 Months Ended
	May 31, 2013	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Apr. 30, 2014 Exchanged for 2017 Convertible Notes [Member] Convertible Notes 2015 [Member]	Apr. 30, 2014 Exchanged From 2015 Convertible Note [Member] Convertible Notes 2017 [Member]	Sep. 30, 2013 Shares [Member] Convertible Notes 2017 [Member]	Feb. 03, 2011 Shares [Member] Convertible Notes 2015 [Member]	Jun. 30, 2014 Shares [Member] Convertible Notes 2015 [Member]	Sep. 30, 2013 Per Principal Amount [Member] Convertible Notes 2017 [Member]	Feb. 03, 2011 Per Principal Amount [Member] Convertible Notes 2015 [Member]	Jun. 30, 2014 Convertible Debt Net [Member] Convertible Notes 2017 [Member]	Jun. 30, 2014 Convertible Debt Net [Member] Convertible Notes 2015 [Member]	Jun. 30, 2014 Principal Amount Convertible Notes [Member] Convertible Notes 2015 [Member]	Sep. 30, 2013 Additional Funding [Member] Convertible Notes 2017 [Member]	May 31, 2013 Additional Funding [Member] $40 Million Secured Debt Facility [Member]	Sep. 30, 2013 Original Offering [Member] Convertible Notes 2017 [Member]	Sep. 30, 2013 After October 1, 2013 [Member] Convertible Notes 2017 [Member]	Sep. 30, 2013 Prior to July 1, 2017 [Member] Convertible Notes 2017 [Member]	Sep. 30, 2013 10% Discount [Member] Convertible Notes 2017 [Member]	Sep. 30, 2013 Estimated [Member] Convertible Notes 2017 [Member]	Jun. 30, 2014 Estimated [Member] Convertible Notes 2015 [Member]	Sep. 30, 2013 Gross Discount [Member] Convertible Notes 2017 [Member]	Apr. 30, 2014 Amortized As Non-Cash Interest Expense [Member] Convertible Notes 2017 [Member]	Sep. 30, 2013 Amortized As Non-Cash Interest Expense [Member] Convertible Notes 2017 [Member]	Sep. 30, 2013 Transaction Costs Associated with Equity Component [Member] Convertible Notes 2017 [Member]	Sep. 30, 2013 Remaining Amount Expenses [Member] Convertible Notes 2017 [Member]	Jun. 30, 2014 Including Amortization of Debt Issue Costs [Member] Convertible Notes 2017 [Member]	Jun. 30, 2014 Remaining Principal Balance [Member] Convertible Notes 2015 [Member]	Sep. 30, 2013 Remaining Principal Balance [Member] $170.9 Million Convertible Notes [Member]	Jun. 30, 2014 After March 31, 2010 [Member] Convertible Notes 2015 [Member]	Jun. 30, 2014 Prior to January 1, 2015 [Member] Convertible Notes 2015 [Member]	Jun. 30, 2014 After February 1, 2015 [Member] Convertible Notes 2015 [Member]	Sep. 30, 2013 Retirement of Debt [Member] Convertible Notes 2015 [Member]	Apr. 30, 2013 Retirement of Debt [Member] Convertible Notes 2015 [Member]	Sep. 30, 2013 Exchange of Debt [Member] Convertible Notes 2015 [Member]	Jun. 30, 2012 Fees and Prepayment Premium [Member] $75 Million Secured Debt Facility [Member]	Sep. 30, 2013 Fees and Prepayment Premium [Member] $40 Million Secured Debt Facility [Member]	Jun. 30, 2013 Fees and Prepayment Premium [Member] $75 Million Secured Debt Facility [Member]	Sep. 30, 2013 Remaining Unamortized Debt Issue Costs [Member] $40 Million Secured Debt Facility [Member]	May 31, 2013 Remaining Unamortized Debt Issue Costs [Member] $40 Million Secured Debt Facility [Member]	Jun. 30, 2013 Remaining Unamortized Debt Issue Costs [Member] $75 Million Secured Debt Facility [Member]	Jul. 31, 2013 Ceiling of Original Principal Amount Borrowed [Member]	Sep. 30, 2013 Convertible Notes 2017 [Member] Direct Offering Expenses [Member]	Sep. 30, 2013 Convertible Notes 2017 [Member] Commissions in Connection with Offerring [Member]	Apr. 30, 2014 Convertible Notes 2017 [Member]	Jun. 30, 2014 Convertible Notes 2017 [Member]		Sep. 30, 2013 Convertible Notes 2017 [Member]	Jun. 30, 2014 Convertible Notes 2017 [Member]		Dec. 31, 2013 Convertible Notes 2017 [Member]		Apr. 30, 2013 Convertible Notes 2017 [Member]	Mar. 31, 2010 Convertible Notes 2015 [Member] Direct Offering Expenses [Member]	Mar. 31, 2010 Convertible Notes 2015 [Member] Amortized As Non-Cash Interest Expense [Member]	Mar. 31, 2010 Convertible Notes 2015 [Member] Allocated To Equity Component Of Convertible Debt [Member]	Mar. 31, 2010 Convertible Notes 2015 [Member] Commissions in Connection with Offerring [Member]	Apr. 30, 2014 Convertible Notes 2015 [Member]	Jun. 30, 2014 Convertible Notes 2015 [Member]		Sep. 30, 2013 Convertible Notes 2015 [Member]	Mar. 31, 2010 Convertible Notes 2015 [Member]	Jun. 30, 2014 Convertible Notes 2015 [Member]		Jun. 30, 2014 Convertible Notes 2015 [Member]		Dec. 31, 2013 Convertible Notes 2015 [Member]		Feb. 03, 2011 Convertible Notes 2015 [Member]	Apr. 30, 2014 25.0 Million Dollar Convertible Notes [Member]	Sep. 30, 2013 $170.9 Million Convertible Notes [Member]	May 31, 2012 $75 Million Secured Debt Facility [Member] Block Z-1 [Member]	Dec. 31, 2012 $75 Million Secured Debt Facility [Member] Block XIX [Member]	May 31, 2013 $75 Million Secured Debt Facility [Member]	May 31, 2012 $75 Million Secured Debt Facility [Member]	Jun. 30, 2012 $75 Million Secured Debt Facility [Member]	Dec. 31, 2012 $75 Million Secured Debt Facility [Member]	Jul. 31, 2011 $75 Million Secured Debt Facility [Member]	Jun. 30, 2014 $75 Million Secured Debt Facility [Member] Maximum [Member]	May 31, 2013 $40 Million Secured Debt Facility [Member]	Sep. 30, 2013 $40 Million Secured Debt Facility [Member]	Jan. 31, 2011 $40 Million Secured Debt Facility [Member]	Jul. 31, 2013 $40 Million Secured Debt Facility [Member] Maximum [Member]
Note 10 - Debt Obligations (Details) [Line Items]
Convertible Debt, Noncurrent							$ 25,000,000						$ 152,800,000					$ 125,000,000																														$ 168,700,000		$ 143,800,000	$ 168,700,000													$ 170,900,000
Proceeds from Convertible Debt																18,800,000																																		124,500,000														164,900,000
Convertible Debt						26,000,000									59,900,000															59,900,000	85,900,000					26,000,000												152,787,000	[1]		152,787,000	[1]	125,416,000	[1]	25,000,000						58,169,000	[2]		170,900,000	58,169,000	[2]	58,169,000	[2]	81,523,000	[2]
Debt Instrument, Interest Rate, Stated Percentage																																																8.50%			8.50%		8.50%								6.50%				6.50%		6.50%		6.50%
Debt Instrument, Maturity Date																																																		Oct. 01, 2017															Mar. 01, 2015
Debt Instrument, Convertible, Conversion Ratio								249.5866	148.3856	169.0082																																																							169.0082
Debt Instrument, Convertible, Conversion Ratio				1,000							1,000	1,000
Debt Instrument, Convertible, Conversion Price (in Dollars per share)																																																		$ 4.0066											$ 5.9169				$ 5.9169		$ 5.9169				$ 6.74
Debt Instrument, Convertible, Threshold Percentage of Stock Price Trigger																			130.00%	97.00%												130.00%	97.00%
Debt Instrument, Convertible, Threshold Consecutive Trading Days																																																		20 days															20 days
Debt Instrument, Redemption Price, Percentage																																																		100.00%																	100.00%
Debt Instrument, Discount Percentage																																																		10.00%											4.00%		10.00%
Debt Instrument, Unamortized Discount																					14,400,000			19,300,000																								15,900,000		14,400,000	15,900,000		18,300,000								1,700,000			34,600,000	1,700,000		1,700,000		4,400,000			400,000
Payments of Debt Issuance Costs																	1,800,000								300,000	2,300,000	100,000																		600,000	4,300,000		300,000		2,300,000						600,000	4,800,000	1,300,000	5,500,000					6,100,000
Debt Instrument, Interest Rate, Effective Percentage																						12.90%	12.00%						12.50%																		7.89%														12.00%				12.00%		12.00%
Convertible Debt, Fair Value Disclosures																																																202,076,000	[1]	124,500,000	202,076,000	[1]	130,094,000	[1]							60,684,000	[2]		136,300,000	60,684,000	[2]	60,684,000	[2]	79,663,000	[2]		25,400,000
Fair Value Inputs, Discount Rate																																																		10.00%
Debt Instrument, Convertible, Carrying Amount of Equity Component																																															500,000			4,900,000														33,300,000
Other Nonoperating Income (Expense)		(96,000)	(818,000)	(29,000)	(1,147,000)																							2,500,000
Gains (Losses) on Extinguishment of Debt		(1,245,000)	(3,786,000)	(1,245,000)	(3,786,000)																																	(5,800,000)	(2,000,000)	(2,400,000)	(1,700,000)		(1,400,000)				(900,000)													(300,000)			200,000
Debt Instrument, Convertible, Number of Equity Instruments																																																			42,100,000														10,100,000
Share Price (in Dollars per share)																																																$ 3.08			$ 3.08										$ 3.08				$ 3.08		$ 3.08
Debt Instrument, Repurchased Face Amount																																																															85,000,000										85,000,000
Debt Instrument, Redemption, Threshold Percentage of Stock Price Trigger																																		175.00%
Repayments of Convertible Debt																																			12,200,000		72,800,000														218,901,000														63,783,000
Convertible Debt, Current														58,200,000
Debt Instrument, Face Amount																																																																												75,000,000				75,000,000		25,500,000	40,000,000	40,000,000
Repayments of Debt				0	46,139,000																																																																							25,500,000	40,000,000
Debt Instrument Reimburse Certain Affiliates																																																																										14,000,000	6,000,000
Debt Issuance Cost																																																																														1,100,000
Fees Prepayment Penalty and Debt Issuance Cost Payment Percentage																																																																														25.00%	25.00%
Performance Based Arranger Fee Percentage																																												18.00%																																					12.00%				18.00%
Proceeds from Issuance of Debt	14,500,000																																																																																	14,500,000
Unamortized Debt Issuance Expense																																										$ 600,000

[1] The Company estimated the fair value of the 2017 Convertible Notes to be approximately $202.1 million and $130.1 million at June 30, 2014 and December 31, 2013, respectively, based on observed market prices for the same or similar types of debt issues. The fair value of the 2017 Convertible Notes is considered to be a Level 1 measurement on the fair value hierarchy.

[2] The Company estimated the fair value of the 2015 Convertible Notes to be approximately $60.7 million and $79.7 million at June 30, 2014 and December 31, 2013, respectively, based on observed market prices for the same or similar types of debt issues. The fair value of the 2015 Convertible Notes is considered to be a Level 1 measurement on the fair value hierarchy.

XML

Note 8 - Investment in Ecuador Property

6 Months Ended

Jun. 30, 2014

Investment Property Disclosure [Abstract]

Investment Property Disclosure [Text Block]

Note 8— Investment in Ecuador Property

The Company has a 10% non-operating net profits interest in the Santa Elena Property an oil and gas property in Ecuador. The Company accounts for this investment under the cost method and records its share of cash received as other income. Since the Company’s investment represents ownership of an oil and gas property, which is a depleting asset, the Company is amortizing the cost of the investment on a straight-line basis over the remaining term of the agreement, which expires in December 2029.

Below is a summary reflecting the Company’s income (loss) from the investment in the Ecuador property for the three and six months ended June 30, 2014 and 2013, respectively, and the investment in the Ecuador property at June 30, 2014 and December 31, 2013, respectively.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013
	(in thousands)
Distributions received from investment in Ecuador property	$	-		$	250		$	-		$	250
Amortization of investment in Ecuador property		(9	)		(34	)		(17	)		(81	)
Income (loss) from investment in Ecuador property, net	$	(9	)	$	216		$	(17	)	$	169

	June 30,		December 31,
	2014		2013
	(in thousands)
Investment in Ecuador property, net	$	517	$	534

In 2013, the Consortium, which includes the Company and three other partners, in order to extend the term of the contract from 2016 to 2029 agreed to additional work commitments to increase production in the Santa Elena field. The Company’s total share of this commitment over the remaining life of the contract is $3.8 million (the Company’s 10% non-operating net profits interest) which amount is due for the remainder of 2014 through 2028. This commitment is expected to be funded by cash on hand and cash generated from new production of the Consortium. If the Consortium does not have sufficient cash on hand, the Company may elect to make a cash contribution to the Consortium for its 10% share of the commitment. If the Company elects not to make its 10% share contribution of the commitment, it would lose its rights in the Consortium and the Contract at the Santa Elena field.

XML

Note 9 - Restricted Cash and Performance Bonds

6 Months Ended

Jun. 30, 2014

Disclosure Text Block Supplement [Abstract]

Restricted Assets Disclosure [Text Block]

Note 9— Restricted Cash and Performance Bonds

Below is a summary of restricted cash as of June 30, 2014 and December 31, 2013:

	June 30, 2014		December 31, 2013
	(in thousands)
Performance bonds totaling $5.7 million for properties in Peru	$	3,459	$	3,459
Performance obligations and commitments for the gas-to-power site		650		650
Secured letters of credit		-		250
$40.0 million secured debt facility		1,000		1,000
Unsecured performance bond totaling $0.1 million for office lease agreement		-		-
Restricted cash	$	5,109	$	5,359
Current portion of restricted cash as of the end of the period	$	1,000	$	1,250
Long-term portion of restricted cash as of the end of the period	$	4,109	$	4,109

The $75.0 million secured debt facility entered into by the Company in July 2011 required the Company to establish a $2.5 million debt service reserve account during the first 15 months the debt facility was outstanding.  After the first 15-month period, the Company was required to keep a balance in the debt service reserve account equal to the aggregate amount of principal and interest due on the next quarterly repayment date. The requirement was subsequently amended subject to the closing of the sale of a 49% participating interest in Block Z-1 to require the funding of the debt service reserve account related to the $75.0 million secured debt facility in the amount of outstanding principal. The remaining principal balance related to the $75.0 million secured debt facility was repaid in May 2013 utilizing the funds in the debt service reserve account related to this debt facility, bringing both the current and non-current balances to zero at June 30, 2014 and at December 31, 2013.

The $40.0 million secured debt facility entered into by the Company in January 2011 required the Company to establish a $2.0 million debt service reserve account during the first 18-month period and, thereafter, to maintain a balance in the debt service reserve account equal to the aggregate amount of principal and interest payment on the $40.0 million secured debt facility due on the succeeding principal repayment date. The requirement was amended subject to the closing of the sale of a 49% participating interest in Block Z-1 to increase the funding of the debt service reserve account related to the $40.0 million secured debt facility to the amount of outstanding principal. The requirement was subsequently changed when the Company amended and restated the $40.0 million secured debt facility in May 2013 for the Company to maintain a balance in the debt service reserve account equal to the aggregate amount of principal and interest payment on the $40.0 million secured debt facility due on the succeeding principal repayment date. The remaining principal balance related to the $40.0 million secured debt facility was repaid in September 2013 utilizing $3.8 million of funds from the debt service reserve account related to this debt facility. As a result of the repayment of the remaining principal balance in September 2013 of the $40.0 million secured debt facility, it was agreed that the restricted cash balance would remain at $1.0 million relating to the Performance Based Arranger Fee for the $75.0 million secured debt facility through July 2014. Therefore the restricted cash balance related to the current and non-current portion of the $40.0 million secured debt financing was $1.0 million and zero, respectively, at June 30, 2014. The restricted cash related to the current and non-current portion of the $40.0 million secured debt financing was $1.0 million and zero, respectively, at December 31, 2013. In July 2014 the $1.0 million was released to the Company and the debt service reserve account was terminated.

All of the performance and insurance bonds are issued by Peruvian banks and their terms are governed by the corresponding license contracts, customs laws, legal requirements or rental practices.

XML

Note 11 - Derivative Financial Instruments

6 Months Ended

Jun. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note 11— Derivative Financial Instruments

Objective and Strategies for Using Derivative Instruments:

In connection with the $40.0 million secured debt facility through July 2013 and the $75.0 million secured debt facility through July 2014, the Company and Credit Suisse agreed that a portion of the arranger fee would be based on the performance for oil prices and be payable at each of the principal repayment dates.  The fee is calculated by multiplying the principal payment amount by the change in oil prices from the loan origination date and the oil price at each principal repayment date. Additionally, the fee is capped at 18% of the $40.0 million secured debt facility and 12% of the $75.0 million secured debt facility. The Performance Based Arranger Fee is being accounted for as an embedded financing derivative under ASC Topic 815, “Derivatives and Hedging” and, accordingly, is being recorded at fair value with any changes in value reflected as a gain or loss on derivatives in the accompanying Consolidated Statements of Operations. The following table sets forth a reconciliation of the changes in fair value of the Company’s derivative financial instruments for the six months ended June 30, 2014 and the year ended December 31, 2013:

Derivative Financial Instruments Not Designated as Hedging Instruments

	2014		2013
	(in thousands)
Beginning fair value of derivatives	$	30	$	2,984
(Gain) loss on derivatives		239		(242	)
Cash settlements paid		-		(2,712	)
Ending fair value of derivatives	$	269	$	30

See Note-13, “Fair Value Measurements and Disclosures” for a discussion of methods and assumptions used to estimate the fair values of the Company’s derivative instruments.

XML

Note 10 - Debt Obligations (Details) - Convertible Debt Interest Expense (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Note 10 - Debt Obligations (Details) - Convertible Debt Interest Expense [Line Items]
Amortization of Debt Discount Expense			$ 4,263	$ 5,071
Amortization of Debt Issue Costs	344	740	718	1,418
Convertible Notes 2017 [Member]
Note 10 - Debt Obligations (Details) - Convertible Debt Interest Expense [Line Items]
Interest Expense Related to Contractual Interest Coupon	3,530		6,585
Amortization of Debt Discount Expense	994		1,953
Amortization of Debt Issue Costs	157		292
Interest Expense Related to Convertible Notes	4,681		8,830
Convertible Notes 2015 [Member]
Note 10 - Debt Obligations (Details) - Convertible Debt Interest Expense [Line Items]
Interest Expense Related to Contractual Interest Coupon	1,043	2,777	2,439	5,555
Amortization of Debt Discount Expense	707	1,862	1,592	3,653
Amortization of Debt Issue Costs	187	250	426	495
Interest Expense Related to Convertible Notes	$ 1,937	$ 4,889	$ 4,457	$ 9,703

XML

Note 11 - Derivative Financial Instruments (Details) (USD $) In Millions, unless otherwise specified	Sep. 30, 2013 $40 Million Secured Debt Facility [Member]	May 31, 2013 $40 Million Secured Debt Facility [Member]	Jan. 31, 2011 $40 Million Secured Debt Facility [Member]	Jul. 31, 2013 $40 Million Secured Debt Facility [Member] Maximum [Member]	May 31, 2013 $75 Million Secured Debt Facility [Member]	Jul. 31, 2011 $75 Million Secured Debt Facility [Member]	Jun. 30, 2014 $75 Million Secured Debt Facility [Member] Maximum [Member]
Note 11 - Derivative Financial Instruments (Details) [Line Items]
Debt Instrument, Face Amount	$ 40.0	$ 25.5	$ 40.0		$ 75.0	$ 75.0
Performance Based Arranger Fee Percentage				18.00%			12.00%

XML

Note 10 - Debt Obligations (Details) - Estimated Remaining Cash Payments (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014
Convertible Notes 2017 [Member] | Year One [Member]
Debt Instrument [Line Items]
Cash payments related to convertible notes	$ 7,170
Convertible Notes 2017 [Member] | Year Two [Member]
Debt Instrument [Line Items]
Cash payments related to convertible notes	14,340
Convertible Notes 2017 [Member] | Year Three [Member]
Debt Instrument [Line Items]
Cash payments related to convertible notes	14,340
Convertible Notes 2017 [Member] | Year Four [Member]
Debt Instrument [Line Items]
Cash payments related to convertible notes	183,051
Convertible Notes 2017 [Member]
Debt Instrument [Line Items]
Cash payments related to convertible notes	218,901
Convertible Notes 2015 [Member] | Year One [Member]
Debt Instrument [Line Items]
Cash payments related to convertible notes	1,946
Convertible Notes 2015 [Member] | Year Two [Member]
Debt Instrument [Line Items]
Cash payments related to convertible notes	61,837
Convertible Notes 2015 [Member]
Debt Instrument [Line Items]
Cash payments related to convertible notes	$ 63,783

XML

Note 11 - Derivative Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments [Table Text Block]

	2014		2013
	(in thousands)
Beginning fair value of derivatives	$	30	$	2,984
(Gain) loss on derivatives		239		(242	)
Cash settlements paid		-		(2,712	)
Ending fair value of derivatives	$	269	$	30

XML

Note 6 - Property, Equipment and Construction in Progress (Details) - Property, Equipment and Construction in Progress (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Property, Plant and Equipment [Line Items]
Producing properties (successful efforts method of accounting)	$ 141,307	$ 140,937
Accumulated depletion, depreciation and amortization	(135,613)	(123,319)
Property, equipment and construction in progress, net	224,806	217,753
Power Plant [Member]
Property, Plant and Equipment [Line Items]
Construction in Progress	88,064	82,928
Platforms and Wells [Member]
Property, Plant and Equipment [Line Items]
Construction in Progress	26,258	12,505
Pipelines and Processing Facilities [Member]
Property, Plant and Equipment [Line Items]
Construction in Progress	874	846
Other Construction in Progress [Member]
Property, Plant and Equipment [Line Items]
Construction in Progress	583	556
Producing Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	40,209	40,209
Barge and Related Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	53,969	53,969
Office Equipment, Leasehold Improvements And Vehicles [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 9,155	$ 9,122

XML

Note 16 - Income Tax

6 Months Ended

Jun. 30, 2014

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 16 — Income Tax

The following is a summary of income (loss) before income taxes and income tax expense (benefit) for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013
	(in thousands)
Income (loss) before income taxes:
United States	$	(4,882	)	$	(5,543	)	$	(9,943	)	$	(9,193	)
Foreign		4,458			(14,474	)		7,899			(23,278	)
	$	(424	)	$	(20,017	)	$	(2,044	)	$	(32,471	)

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2014		2013			2014		2013
	(in thousands)
Income tax expense (benefit):
United States	$	-	$	(322	)	$	-	$	668
Foreign		2,125		(55	)		4,075		(715	)
	$	2,125	$	(377	)	$	4,075	$	(47	)

The Company has recognized a gross deferred tax asset related to net operating loss carryforwards attributable to the United States, before application of the valuation allowances. The Company has a valuation allowance for the full amount of the domestic net deferred tax asset, as it believes, based on the weight of available evidence, that it is more likely than not that the deferred tax asset will not be realized prior to the expiration of net operating loss carryforwards in various amounts through 2033. Furthermore, because the Company has no operations within the U.S. taxing jurisdiction, it is likely that sufficient generation of revenue to offset the Company’s deferred tax asset is remote.

The difference from the 22% statutory rate provided for under the Block Z-1 License Contract is due to other Peruvian operations that have a different statutory tax rate, certain expenses which are not deductible in Peru and a change in the timing of when certain expenses are deductible.

The June 30, 2014 and December 31, 2013 balance of unrecognized tax benefits includes $0.7 million that, if recognized, would impact the Corporation’s effective income tax rate. Over the next 12 months, the Company does not anticipate any reduction in the balance. The Company had accrued interest and penalties related to unrecognized tax benefits of $46,000 at both June 30, 2014 and December 31, 2013. Estimated interest and penalties related to potential underpayment on unrecognized tax benefits, if any, are classified as a component of income tax expense in the Consolidated Statement of Operations.

XML

Note 3 - Receivables, Accounts Payable and Accrued Liabilities (Tables)

6 Months Ended

Jun. 30, 2014

Receivables [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

	June 30, 2014		December 31, 2013
	(in thousands)
Commodity sales	$	9,542	$	2,303
Accounts receivable - joint venture		6,877		12,230
Other		4,324		7,097
Accounts receivable	$	20,743	$	21,630

Schedule of Value-added Taxes Receivable [Table Text Block]

	June 30, 2014			December 31, 2013
	(in thousands)
Value-added tax receivable as of the beginning of the period	$	12,262		$	21,784
IGV accrued related to expenditures during period		4,048			12,722
IGV reduced related to sale of oil during period		(12,780	)		(22,244	)
Value-added tax receivable as of the end of the period	$	3,530		$	12,262
Current portion of value-added tax receivable as of the end of the period	$	1,494		$	10,490
Long-term portion of value-added tax receivable as of the end of the period	$	2,036		$	1,772

Schedule of Accounts Payable and Accrued Liabilities [Table Text Block]

	June 30, 2014		December 31, 2013
	(in thousands)
Accounts payable - joint venture	$	719	$	-
Other accounts payable		1,924		3,127
Accounts payable	$	2,643	$	3,127

XML

Note 5 - Prepaid and Other Current Assets and Other Non-current Assets (Details) - Debt Issue Cost Amortized Into Interest Expense (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Debt Issue Cost Amortized Into Interest Expense [Abstract]
Amortization of debt issue costs	$ 344	$ 740	$ 718	$ 1,418

XML

Note 3 - Receivables, Accounts Payable and Accrued Liabilities (Details) (USD $) In Thousands, unless otherwise specified	2 Months Ended	6 Months Ended	40 Months Ended
	Feb. 28, 2011	Jun. 30, 2014	Jun. 30, 2014	Dec. 31, 2013
Note 3 - Receivables, Accounts Payable and Accrued Liabilities (Details) [Line Items]
Accounts Receivable, Net, Current		$ 20,743	$ 20,743	$ 21,630
Income Taxes Receivable, Current		1,973	1,973	2,134
Value-added Tax Rate	19.00%	18.00%	18.00%
Accrued Liabilities, Current		12,454	12,454	11,246
Accounts Receivable - Other [Member]
Note 3 - Receivables, Accounts Payable and Accrued Liabilities (Details) [Line Items]
Accounts Receivable, Net, Current		$ 4,324	$ 4,324	$ 7,097

XML

Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Cash flows from operating activities:
Net loss	$ (6,119)	$ (32,424)
Stock-based compensation	1,577	1,603
Depreciation, depletion and amortization	12,115	14,859
Amortization of investment in Ecuador property	17	81
Deferred income taxes	3,011	(2,602)
Loss on extinguishment of debt	1,245	3,786
Amortization of discount and deferred financing fees	4,263	5,071
(Gain) loss on derivatives	239	(729)
Other non-cash items included in net loss	(32)	43
Changes in operating assets and liabilities:
Decrease in accounts receivable	887	16,239
Decrease in value-added tax receivable	8,731	5,489
(Increase) decrease in inventory	3,733	(236)
Increase in other assets	(946)	(5,770)
Decrease in income taxes receivable	161	0
Increase (decrease) in accounts payable	(483)	18,696
Increase (decrease) in accrued liabilities	972	(13,699)
Decrease in income taxes payable	0	(11,932)
Decrease in other liabilities	(295)	(237)
Net cash provided by (used in) operating activities	29,076	(1,762)
Cash flows from investing activities:
Property and equipment additions	(19,243)	(5,403)
Decrease in restricted cash	250	63,680
Purchase of investment securities	0	(1,000)
Net cash provided by (used in) investing activities	(18,993)	57,277
Cash flows from financing activities:
Borrowings		14,545
Repayments of borrowings	0	(46,139)
Deferred and other loan fees	(296)	(3,654)
Proceeds from sale of common stock, net	19	25
Net cash used in financing activities	(277)	(35,223)
Net increase in cash and cash equivalents	9,806	20,292
Cash and cash equivalents at beginning of period	57,395	83,540
Cash and cash equivalents at end of period	67,201	103,832
Cash paid for:
Interest	9,266	9,404
Income tax	1,012	13,785
Non — cash items:
Convertible debt exchanged	26,000
Depletion allocated to production inventory	241	18
Asset retirement obligation capitalized to property and equipment, net of revisions	105	0
Property and equipment transferred to / from current assets / liabilities or other non-current assets	$ 0	$ 952

XML

Note 5 - Prepaid and Other Current Assets and Other Non-current Assets

6 Months Ended

Jun. 30, 2014

Prepaid And Other Current Assets And Other Non Current Assets Disclosure [Abstract]

Prepaid And Other Current Assets And Other Non Current Assets Disclosure [Text Block]

Note 5— Prepaid and Other Current Assets and Other Non-Current Assets

Below is a summary of prepaid and other current assets as of June 30, 2014 and December 31, 2013:

	June 30, 2014		December 31, 2013
	(in thousands)
Prepaid expenses and other	$	5,660	$	4,327
Prepaid insurance		705		1,092
Prepaid and other current assets	$	6,365	$	5,419

Prepaid expenses and other are related to prepayments for drilling services, equipment rental and material procurement and deposits that are rent deposits in connection with the Company’s offices in Houston and Peru. Prepaid insurance consists of premiums related to the Company’s operations as well as general liability and directors’ and officers’ insurance policies.

Below is a summary of other non-current assets as of June 30, 2014 and December 31, 2013:

	June 30,		December 31,
	2014		2013
	(in thousands)
Debt issue costs, net	$	2,598	$	3,293
Value-added tax receivable		2,036		1,772
Other non-current assets	$	4,634	$	5,065

Debt issue costs, net, consist of direct transaction costs incurred by the Company in connection with its debt raising efforts, less the amortization of the debt issuance costs to date.

In September 2013, the Company prepaid the remaining principal balance on the $40.0 million secured debt facility (which had been repaid by scheduled principal repayments to $36.0 million). In May 2013, the Company prepaid the remaining principal balance on the $75.0 million secured debt facility and amended and restated the $40.0 million secured debt facility (which had been repaid by scheduled principal repayments to $25.5 million) by increasing the facility size and borrowing an additional $14.5 million. The debt issue costs associated with those agreements were modified in accordance with ASC Topic 470 as follows:

(1) In May 2013, the Company prepaid the remaining principal balance on the $75.0 million secured debt facility and, accordingly, expensed the remaining $1.4 million of unamortized debt issue costs as part of the “Loss on extinguishment of debt.”

(2) In May 2013, the Company amended and restatement of the $40.0 million secured debt facility (which had been repaid by scheduled principal repayments to $25.5 million) associated with the increase in the facility size and borrowing of an additional $14.5 million, the Company added $1.8 million of debt issue costs incurred to the remaining unamortized debt issue costs of $0.6 million. The amendment and restatement was not considered a substantial modification of debt. The $2.4 million of debt issue costs was to be amortized to expense over the remaining term of the $40.0 million secured debt facility, ending in January 2015, using the effective interest method. In September 2013, the Company prepaid the remaining principal balance on the $40.0 million secured debt facility and, accordingly, expensed the remaining $1.7 million of unamortized debt issue costs as part of the “Loss on extinguishment of debt.”

The Company incurred $4.8 million of original debt issue costs in the first quarter of 2010 associated with the issuance of an aggregate principal amount of $170.9 million of convertible notes due 2015 (the “2015 Convertible Notes”). The debt issue costs are being amortized over the life of the 2015 Convertible Notes, using the effective interest method. As a result of the repurchase of $85.0 million aggregate principal amount of 2015 Convertible Notes during the third quarter of 2013, approximately $12.2 million of the repayment was considered a retirement of debt and approximately $0.1 million of unamortized debt issue costs were expensed. The remaining $72.8 million of the repayment was considered an exchange of debt and not deemed a substantial modification of debt. The remaining unamortized debt issue costs are being amortized over the remaining life of the 2015 Convertible Notes, using the effective interest method. In April 2014, $26.0 million of the aggregate principal amount of the 2015 Convertible Notes were exchanged for an additional $25.0 million aggregate principal amount of 2017 Convertible Notes in a private transaction. The $26.0 million of the exchange was considered a retirement of debt and approximately $0.3 million of unamortized debt issue costs were expensed as part of the “Loss on extinguishment of debt.” The remaining unamortized debt issue costs of $0.6 million are being amortized over the remaining life of the 2015 Convertible Notes, using the effective interest method.

The Company incurred $2.3 million of original debt issue costs in the third quarter of 2013 associated with the issuance of an aggregate principal amount of $143.8 million of convertible notes due 2017 (the “2017 Convertible Notes”).  In the second quarter of 2014, the Company incurred $0.3 million of debt issue costs associated with the issuance in the exchange of the aggregate principal amount of $25.0 million of 2017 Convertible Notes. The debt issue costs are being amortized over the life of the 2017 Convertible Notes, using the effective interest method.

The following table is the amount of debt issue costs amortized into interest expense for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
	(in thousands)
Amortization of debt issue costs	$	344	$	740	$	718	$	1,418
	$	344	$	740	$	718	$	1,418

For further information regarding the Company’s debt, see Note-10, “Debt Obligations.”

At June 30, 2014 and December 31, 2013, the Company classified $2.0 million and $1.8 million, respectively, of its value-added tax receivable balance as a long-term asset as it believed it would take longer than one year to receive the benefit of this portion of the value-added tax receivable. For further information see Note-3, “Receivables, Accounts Payable and Accrued Liabilities.”

XML

Note 9 - Restricted Cash and Performance Bonds (Details) - Restricted Cash (USD $)	Jun. 30, 2014	Dec. 31, 2013
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash	$ 5,109,000	$ 5,359,000
Current portion of restricted cash as of the end of the period	1,000,000	1,250,000
Long-term portion of restricted cash as of the end of the period	4,109,000	4,109,000
Performance Bonds [Member]
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash	3,459,000	3,459,000
Performance Obligations and Commitments Gas-to-power Site [Member]
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash	650,000	650,000
Secured Letters of Credit [Member]
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash		250,000
$40 Million Secured Debt Facility [Member]
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash	$ 1,000,000	$ 1,000,000

XML

Note 12 - Stockholders' Equity (Details) - Earnings (Loss) Per Share of Common Stock (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2014		Jun. 30, 2013		Jun. 30, 2014		Jun. 30, 2013
Note 12 - Stockholders' Equity (Details) - Earnings (Loss) Per Share of Common Stock [Line Items]
Net loss (in Dollars)	$ (2,549)		$ (19,640)		$ (6,119)		$ (32,424)
Basic weighted average common shares outstanding	116,342		115,935		116,193		115,862
Incremental shares from assumed conversion of dilutive share based awards	0		0		0		0
Diluted weighted average common shares outstanding	116,342		115,935		116,193		115,862
Basic net loss per share (in Dollars per share)	$ (0.02)		$ (0.17)		$ (0.05)		$ (0.28)
Diluted net loss per share (in Dollars per share)	$ (0.02)		$ (0.17)		$ (0.05)		$ (0.28)
Antidilutive Stock Option [Member]
Note 12 - Stockholders' Equity (Details) - Earnings (Loss) Per Share of Common Stock [Line Items]
Excluded	8,480	[1],[2]	8,140	[1],[2]	8,480	[1],[2]	8,140	[1],[2]
Convertible Notes 2017 [Member]
Note 12 - Stockholders' Equity (Details) - Earnings (Loss) Per Share of Common Stock [Line Items]
Excluded	42,108	[1]		[1]	42,108	[1]		[1]
Convertible Notes 2015 [Member]
Note 12 - Stockholders' Equity (Details) - Earnings (Loss) Per Share of Common Stock [Line Items]
Excluded	10,122	[1]	28,890	[1]	10,122	[1]	28,890	[1]

[1] Inclusion of the shares for these awards would have had an antidilutive effect.

[2] Inclusion of the performance share units for these awards would have had an antidilutive effect. The actual number of performance share units earned may range from 0% to 200%.

XML

Note 4 - Inventory (Tables)

6 Months Ended

Jun. 30, 2014

Inventory Disclosure [Abstract]

Schedule of Inventory, Current [Table Text Block]

	June 30, 2014		December 31, 2013
	(in thousands)
Tubular goods, accessories and spare parts	$	11,232	$	15,534
Crude oil		2,676		1,834
Inventory	$	13,908	$	17,368

	June 30, 2014		December 31, 2013
Crude oil (barrels)		42,124		24,866
Crude oil (cost per barrel)	$	63.54	$	73.77

XML

Note 13 - Fair Value Measurements and Disclosures (Details) - Fair Value of Company’s Fixed Rate Debt (Parentheticals) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014 Convertible Notes 2017 [Member]	Dec. 31, 2013 Convertible Notes 2017 [Member]	Sep. 30, 2013 Convertible Notes 2017 [Member]	Jun. 30, 2014 Convertible Notes 2015 [Member]	Dec. 31, 2013 Convertible Notes 2015 [Member]	Mar. 31, 2010 Convertible Notes 2015 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Convertible Notes, Interest Rate	8.50%	8.50%		6.50%	6.50%
Convertible Notes, Discount	$ 15,900	$ 18,300	$ 14,400	$ 1,700	$ 4,400	$ 34,600

XML

Note 16 - Income Tax (Tables)

6 Months Ended

Jun. 30, 2014

Income Tax Disclosure [Abstract]

Schedule of Income before Income Tax, Domestic and Foreign [Table Text Block]

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013
	(in thousands)
Income (loss) before income taxes:
United States	$	(4,882	)	$	(5,543	)	$	(9,943	)	$	(9,193	)
Foreign		4,458			(14,474	)		7,899			(23,278	)
	$	(424	)	$	(20,017	)	$	(2,044	)	$	(32,471	)

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2014		2013			2014		2013
	(in thousands)
Income tax expense (benefit):
United States	$	-	$	(322	)	$	-	$	668
Foreign		2,125		(55	)		4,075		(715	)
	$	2,125	$	(377	)	$	4,075	$	(47	)

XML

Note 15 - Standby Costs

6 Months Ended

Jun. 30, 2014

Other Income and Expenses [Abstract]

Other Income and Other Expense Disclosure [Text Block]

Note 15 — Standby Costs

For the three and six months ended June 30, 2014, the Company incurred no standby costs.

For the three and six months ended June 30, 2013, the Company incurred $2.3 million and $3.4 million, respectively, of standby costs. During the three months ended June 30, 2013, the Company had Petrex-28 rig either partially of fully on standby for three months. During the six months ended June 30, 2013, the Company had the Petrex-10 rig partially or fully on standby for approximately two months and the Petrex-28 rig partially or fully on standby for approximately five months.