ACCOUNTS RECEIVABLE - OTHER

9 Months Ended

Sep. 30, 2012

ACCOUNTS RECEIVABLE - OTHER [Abstract]

ACCOUNTS RECEIVABLE - OTHER

NOTE 2 – ACCOUNTS RECEIVABLE – OTHER

Gulf United Energy, Inc.

In connection with the Company's acquisition in July 2010 of an additional 12.5% interest in the approximately 345,452 acre CPO 4 Block in the Llanos Basin of Colombia and which is operated by SK Energy Co. LTD ("SK Energy"), the Company entered into a separate agreement with Gulf United Energy, Inc. ("Gulf United") whereby the Company waived its right of first refusal under the CPO 4 Block Joint Operating Agreement for the specific purpose of permitting Gulf United to acquire from SK Energy a 12.5% interest in the CPO 4 Block. Under the agreement with Gulf United, as a condition of the Company's agreement to waive its preferential rights, Gulf United agreed to pay to the Company, not later than 30 days following National Hydrocarbon Agency of Colombia (the "ANH") approval, which is still pending and is expected to occur in 2012, (i) the Company's 12.5% share of past costs (as defined in the Farmout Agreement with SK Energy) incurred through July 31, 2010, and (ii) the Company's 25% share of seismic acquisition costs incurred through July 31, 2010, or a total of $3,951,423.  The amount due from Gulf United is classified as accounts receivable – other in the accompanying balance sheet.

As a result of Gulf United Energy's delinquency in satisfying its financial obligations with respect to the CPO 4 prospect, during the quarter ended September 30, 2012, the Company wrote-down our receivable from Gulf United for $3,951,370 and recorded bad debt expense.  If Gulf United Energy is unable, or unwilling, to satisfy its various obligations relating to the CPO 4 prospects, our interest in the CPO 4 prospect may be proportionately increased and we may be required to pay a proportionately higher share of development costs on the CPO 4 Block.

Hupecol Operating, LLC

During 2011, Hupecol Operating, LLC ("Hupecol") disbursed funds from a 5% contingency escrow established with a portion of the proceeds from the sale of Hupecol Dorotea & Cabiona Holdings, LLC ("HDC, LLC"), to pay certain operating expenses incurred on behalf of the purchaser of these entities.  Hupecol is currently seeking reimbursement from the purchaser for these expenses as part of the post-closing process and expects to collect within the next twelve months.  As a result of this activity, the Company has established a receivable from Hupecol for the Company's proportionate share of the escrow funds disbursed for these expenses of $370,834.  The amount due from Hupecol is classified as accounts receivable – other in the accompanying balance sheet.