Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Use of Estimates Policy

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from these estimates. The results of operations for the three and six months ended June 30, 2014 are not necessarily indicative of the results to be expected for the full year.

Principles of Consolidation

Principles of Consolidation – The consolidated condensed financial statements include the accounts of all companies that we, through our direct or indirect ownership or shareholding, were provided the ability to control their operating policies and procedures. All significant intercompany balances and transactions have been eliminated.

As a result of the sales of our Gulf Coast oil and gas properties and the abandonment of our coalbed methane projects during 2011, any remaining Gulf Coast oil and gas and coalbed methane activities are included as discontinued operations on the consolidated condensed balance sheets, consolidated condensed statements of operations and consolidated condensed statements of cash flows for all periods presented.

Accumulated Other Comprehensive Income

Accumulated Other Comprehensive Income – Comprehensive income includes changes in stockholders’ equity during the periods that do not result from transactions with stockholders. Changes in our accumulated other comprehensive income during the period are as follows (in thousands):

	Foreign Currency		Unrealized
	Translation		Gain (Loss) on			Accumulated Other
	Adjustments		Investments			Comprehensive Income
Balance as of December 31, 2013	$	1,215	$	7,605		$	8,820
Current period other comprehensive income (loss)		515		(3,057	)		(2,542	)
Balance as of June 30, 2014	$	1,730	$	4,548		$	6,278

Fair Value of Financial Instruments

Fair Value of Financial Instruments – Financial instruments are stated at fair value as determined in good faith by management. Factors considered in valuing individual investments include, without limitation, available market prices, reported net asset values, marketability, restrictions on disposition, current financial position and operating results, and other pertinent information (see Note 7 – “Fair Value Measurements”).

We carry our financial instruments, which include cash, restricted cash, our common stock investment in Global Energy Development PLC (“Global”) and our Global note receivable, at their estimated fair values. Our investment in ordinary shares of Global has been designated as available for sale rather than a trading security. The associated unrealized gains and losses on our available for sale investment are recorded to other comprehensive income until realized and reclassified into earnings using specific identification. The fair value of our investment in the ordinary shares of Global is based on prices quoted in an active market. Our investment in Global is classified as a non-current asset in our accompanying consolidated condensed balance sheets.

Translation of Non-US Currency Amounts

Translation of Non-U.S. Currency Amounts – Our investment in Global is subject to foreign currency exchange rate risk as Global’s ordinary shares are denominated in British pounds sterling. Translation adjustments are included in other comprehensive income until the investment is sold.

Property and Equipment

Property and Equipment – We recorded depreciation expense related to other property and equipment of $21 thousand and $13 thousand for the three months and $40 thousand and $29 thousand for the six months ended June 30, 2014 and 2013, respectively. Depreciation, depletion and amortization expense for oil and gas producing properties and related equipment was $121 thousand and $69 thousand for the three months and $184 thousand and $212 thousand for the six months ended June 30, 2014 and 2013, respectively.

Capital Leases

Capital Leases – During the second quarter 2014, we leased equipment for the Arctic Star plant under two separate capital leases which each have two year minimum lease terms. These leases include options to renew and/or purchase the leased property. These assets are included in plant, property and equipment in our consolidated condensed balance sheets. At June 30, 2014, total assets acquired under capital leases were $844 thousand. There was no amortization expense for the six months ended June 30, 2014, as the assets had not been placed into service as of June 30, 2014.

At June 30, 2014, the total capital lease obligation was $757 thousand, of which $363 thousand was classified as a short-term liability and $394 thousand was classified as a long-term liability in our consolidated condensed balance sheets. Capital lease interest expense was $63 thousand for the three and six months ended June 30, 2014. The following is a schedule of remaining future minimum lease payments under capital leases (in thousands):

Year Ending December 31,
	2014	$	273
	2015		543
	2016		176
	Total minimum lease payments		992
	Less: Amount representing interest (1)		(235	)
	Present value of minimum lease payments	$	757

 __________________________

(1) Amount to reduce minimum lease payments to fair value as calculated by the imputed interest rate at lease inception since the present value of the minimum lease payments as calculated by the incremental borrowing rate exceeded fair value at inception of the leases.

Intangible Assets

Intangible Assets – Our intangible assets consist of patents acquired in connection with our investment in BriteWater International, Inc. (“BWI”). Our patents were valued at $2.6 million on their acquisition date and are amortized on a straight-line basis over a period of 6-21 years, based on their respective contractual lives. Accumulated amortization in the amount of $1 million has been recorded on these patents to date. We have recorded amortization expense related to these patents of $52 thousand for both the three months and $103 thousand for both the six months ended June 30, 2014 and 2013, respectively. Patent annuity fees and legal fees related to the renewal of our existing patents are expensed as incurred and recorded within selling, general and administrative expenses in our consolidated condensed statements of operations.

Other Assets

Other Assets – At June 30, 2014, other assets included $61 thousand in prepaid drilling costs related to the drilling and completion of wells held by HKN Bakken, Inc. (“HBI”), $17 thousand in deposits related to the Arctic Star site lease and facility and restricted cash of $50 thousand for a Letter of Credit required for the Arctic Star plant site lease.

Accrued Liabilities and Other

Accrued Liabilities and Other – At June 30, 2014, accrued liabilities and other included approximately $520 thousand in accrued capital costs related to the construction, installation and commissioning of the Arctic Star plant and approximately $170 thousand in accrued capital costs related to the drilling and completion of HBI wells under development.

Stock-Based Compensation

Stock-Based Compensation – We measure all stock-based compensation awards using a fair value method on the date of grant and recognize such expense in our consolidated financial statements over the requisite service period on a straight-line basis. We use the Black-Scholes formula to determine the fair value of stock-based compensation awards on the date of grant. The Black-Scholes formula requires management to make assumptions regarding the option lives, expected volatility, and risk free interest rates. Total stock-based compensation recognized within selling, general and administrative expenses in the Company’s consolidated condensed statements of operations was $53 thousand and $18 thousand for the three months and $106 thousand and $11 thousand for the six months ended June 30, 2014 and 2013, respectively.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements – In April 2014, FASB issued the Accounting Standards Update No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This standard revises the definition of a discontinued operation to limit the circumstances under which a disposal or classification as held for sale qualifies for presentation as a discontinued operation. Amendments in this standard require expanded disclosures concerning a discontinued operation and the disposal of an individually-material component of an entity not qualifying as a discontinued operation. The standard is effective for annual and interim periods beginning on or after December 15, 2014 and should be applied prospectively, with early adoption permitted. We currently do not expect this standard to have any impact on our consolidated financial statements.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09 on revenue from contracts with customers. Under this new standard, revenue is recognized at the time a good or service is transferred to a customer for the amount of consideration received for that specific good or service. The standard is effective for interim and annual periods beginning after December 16, 2016, and early adoption is not permitted. Adoption is allowed by either the full retrospective or modified retrospective approach. We are currently evaluating which approach we will apply and the impact, if any, that this standard will have on our consolidated financial statements.