Note 4 - Divestiture

12 Months Ended

Dec. 31, 2014

Discontinued Operations and Disposal Groups [Abstract]

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

Note 4— 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 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.

At closing, Pacific Rubiales exchanged certain loans along with an additional $85.0 million, plus other amounts due to the Company or from the Company under the SPA, for the interests and assets obtained from the Company under the SPA and under the Block Z-1 License Contract. Proceeds of $150.0 million (less transaction costs of $5.7 million) less the net book value of the assets resulting in a gain on the sale of $26.9 million for the year ended December 31, 2012, which was recognized as a component of operating and administrative expenses in connection with the closing. Due to certain tax benefits resulting from the sale, the after tax gain was $31.1 million.

The transaction provided for an adjustment based upon the collection of revenues ($56.1 million) and the payment of expenses ($32.6 million) and income taxes ($5.2 million) attributable to the properties that took place after the effective date of January 1, 2012 and prior to the closing date which was December 14, 2012. These amounts were considered settled by adjusting down $18.3 million of the unused portion of the carry amount.

The carry amount Pacific Rubiales agreed to pay under the joint venture was completed in December 2014 and we are now responsible for funding our full share of capital expenditures and joint operating expenditures for Block Z-1.

The December 31, 2013 carry amount was $81.3 million.  

At December 31, 2014 and December 31, 2013, the Company reflected $22.5 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 under funding by Pacific Rubiales of the exploratory expenditures in Block Z-1 incurred in 2012. This amount is being settled by the Company and Pacific Rubiales under the terms of the SPA with cash payments under the liability of $14.4 million occurring in 2014.