BriteWater International, Inc.	12 Months Ended
Dec. 31, 2014
Britewater International Inc.
BriteWater International, Inc.	(2) BRITEWATER INTERNATIONAL, INC. BWI holds patents for oilfield emulsion breaking technology. This is a continuous process technology that can purify oilfield emulsions by breaking and separating the emulsions into oil, water and solids, thereby reducing the environmental impact and disposal costs of these waste materials while recovering valuable oil. This technology has been successfully tested in multiple refineries as well as in a demonstration in Prudhoe Bay, Alaska, all of which confirmed the effectiveness of the emulsion breaking technology to recover valuable hydrocarbons and reduce wastes. BWI has completed the design, construction and installation of standardized modules which can be configured for use in both upstream and downstream applications in the oil and gas industry, including processing oilfield and refinery emulsions to recover valuable oil and remediating oil spills. BWI’s wholly-owned subsidiary, Arctic Star Alaska, Inc. (“Arctic Star”), BWI’s initial project to commercialize its emulsions-breaking technology, leased a site in Deadhorse, Alaska for its plant during the first quarter 2014. Arctic Star currently holds contracts which grant Arctic Star the option to take title to oilfield waste generated in six fields on the North Slope at no cost and sell any recovered crude volumes at market prices. The Company continued negotiations for additional feedstock supply agreements during 2014, one of which was obtained in April 2014 and two of which were obtained in January 2015. Arctic Star also entered into an agreement for the sale of 100% of its recovered hydrocarbons on the North Slope during April 2014. Construction was completed during the first quarter 2014 and the modules were shipped to the North Slope and installed during the second quarter 2014. Commissioning of the plant was substantially complete as of December 31, 2014. However, due to the seasonal drilling schedule in Alaska, feedstock needed to perform final test runs was not available as of December 31, 2014. As a result of this and due to the recent steep decline in oil prices, the plant is currently not economic. As a result, management does not expect to operate the Arctic Star plant until oil prices substantially recover. As a result of the current decline in oil prices at December 31, 2014, we evaluated our BWI assets for recoverability. Using a probability weighted average income approach of different courses of actions available, we determined that the Arctic Star plant would be unable to recover its investment at current pricing and recognized an impairment loss of $10.3 million as a component of operating expenses within the BWI operating segment of our consolidated statements of operations as of December 31, 2014. No impairment was recognized on the Arctic Star plant during 2013. Please see Note 7 – “Fair Value Measurements” for more information on the method used to determine the fair value of this asset. BWI also has a completed purpose-built plant which was designed to break emulsions found in weathered lagoon pits. We determined that as a result of current oil pricing and the age of the plant, we would not likely deploy and operate the BWI weathered lagoon plant for its intended purpose in the near future and, as a result, we wrote down the book value of this plant to its estimated salvage value, resulting in an impairment loss of $6.1 million as a component of operating expenses within the BWI operating segment of our consolidated statements of operations as of December 31, 2014. No impairment was recognized on the weathered lagoon plant during 2013. Please see Note 7 – “Fair Value Measurements” for more information on the method used to determine the fair value of this asset. BWI Contingency – BWI had a contingent liability of $800 thousand at December 31, 2013 which would have been payable upon the conclusion of certain performance events related to its weathered lagoon plant. As of December 31, 2014, this contingency was reversed and a gain on contingency was recognized. The reversal was recorded due to the expectation that the plant will not be placed into service in its current state, as well as the determination that the statute of limitations on the contractual obligation had expired.

BriteWater International, Inc.

12 Months Ended

Dec. 31, 2014

(2) BRITEWATER INTERNATIONAL, INC.

BWI holds patents for oilfield emulsion breaking technology. This is a continuous process technology that can purify oilfield emulsions by breaking and separating the emulsions into oil, water and solids, thereby reducing the environmental impact and disposal costs of these waste materials while recovering valuable oil. This technology has been successfully tested in multiple refineries as well as in a demonstration in Prudhoe Bay, Alaska, all of which confirmed the effectiveness of the emulsion breaking technology to recover valuable hydrocarbons and reduce wastes. BWI has completed the design, construction and installation of standardized modules which can be configured for use in both upstream and downstream applications in the oil and gas industry, including processing oilfield and refinery emulsions to recover valuable oil and remediating oil spills.

BWI’s wholly-owned subsidiary, Arctic Star Alaska, Inc. (“Arctic Star”), BWI’s initial project to commercialize its emulsions-breaking technology, leased a site in Deadhorse, Alaska for its plant during the first quarter 2014. Arctic Star currently holds contracts which grant Arctic Star the option to take title to oilfield waste generated in six fields on the North Slope at no cost and sell any recovered crude volumes at market prices. The Company continued negotiations for additional feedstock supply agreements during 2014, one of which was obtained in April 2014 and two of which were obtained in January 2015. Arctic Star also entered into an agreement for the sale of 100% of its recovered hydrocarbons on the North Slope during April 2014. Construction was completed during the first quarter 2014 and the modules were shipped to the North Slope and installed during the second quarter 2014. Commissioning of the plant was substantially complete as of December 31, 2014. However, due to the seasonal drilling schedule in Alaska, feedstock needed to perform final test runs was not available as of December 31, 2014. As a result of this and due to the recent steep decline in oil prices, the plant is currently not economic. As a result, management does not expect to operate the Arctic Star plant until oil prices substantially recover.

As a result of the current decline in oil prices at December 31, 2014, we evaluated our BWI assets for recoverability. Using a probability weighted average income approach of different courses of actions available, we determined that the Arctic Star plant would be unable to recover its investment at current pricing and recognized an impairment loss of $10.3 million as a component of operating expenses within the BWI operating segment of our consolidated statements of operations as of December 31, 2014. No impairment was recognized on the Arctic Star plant during 2013. Please see Note 7 – “Fair Value Measurements” for more information on the method used to determine the fair value of this asset.

BWI also has a completed purpose-built plant which was designed to break emulsions found in weathered lagoon pits. We determined that as a result of current oil pricing and the age of the plant, we would not likely deploy and operate the BWI weathered lagoon plant for its intended purpose in the near future and, as a result, we wrote down the book value of this plant to its estimated salvage value, resulting in an impairment loss of $6.1 million as a component of operating expenses within the BWI operating segment of our consolidated statements of operations as of December 31, 2014. No impairment was recognized on the weathered lagoon plant during 2013. Please see Note 7 – “Fair Value Measurements” for more information on the method used to determine the fair value of this asset.

BWI Contingency – BWI had a contingent liability of $800 thousand at December 31, 2013 which would have been payable upon the conclusion of certain performance events related to its weathered lagoon plant. As of December 31, 2014, this contingency was reversed and a gain on contingency was recognized. The reversal was recorded due to the expectation that the plant will not be placed into service in its current state, as well as the determination that the statute of limitations on the contractual obligation had expired.