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ARTX - Arotech Corporation Reports Results for the First Quarter, 2006; Backlog Now Stands at $39 Million
4:05 p.m. 05/15/2006 Provided by
ANN ARBOR, Mich., May 15, 2006 (BUSINESS WIRE) -- Arotech Corporation (NasdaqNM: ARTX), a provider of quality defense and security products for the military, law enforcement and security markets, today reported results for the quarter ending March 31, 2006.
First Quarter Results
Revenues for the first quarter were $8.9 million, compared to $10.4 million for the corresponding period in 2005.
Gross Profit for the quarter was $2.2 million or 25.2% of revenues, compared to $4.0 million or 38.7% of revenues for the corresponding period in 2005. The decline in gross margins was attributable to the decrease in revenues in the Armor and Battery and Power Systems Divisions, as well as a change in the mix of products and customers in 2006 in comparison to 2005 and substantial expenses incurred in respect of production of a new product in the Armor Division.
The Operating Loss for the quarter was $2.8 million compared to a loss of $1.7 million for the corresponding period in 2005. The Company recorded a net loss of $4.2 million or ($0.05) per share for the quarter, before a deemed dividend, compared to a loss of $2.5 million or ($0.03) per share for the first quarter of 2005.
"We are disappointed with our results for the quarter," said Robert S. Ehrlich, Chairman and CEO of Arotech Corporation. "In addition to the expected seasonal pattern of a weaker first quarter, we needed to defer the billing of a substantial Armor order to the second quarter, which negatively impacted our results."
"We remain confident, however, in our ability to achieve better results for the remainder of the year, which will be primarily reflected in a stronger second half. We recently received several substantial orders contributing to our current funded backlog of close to $40 million. Our Simulation Division continues to perform well and experience strong demand, which we anticipate will carry on throughout the year.
"We recently announced a strategic breakthrough for our Armor Division with the receipt of $22 million in orders from the Israel Defense Force for "David" combat armored vehicles. The David is an ultra-light armored personnel carrier for combat missions designed for the urban low intensity conflict. We believe the David can be appropriate to many urban warfare situations, and we are planning on presentations of the David to other militaries facing similar urban warfare situations. With the receipt of these orders, we anticipate an improvement in the Armor division's performance in the coming quarters.
"During the first quarter, we continued to progress with our restructuring and consolidation program, resulting in a decrease in operating expenses. We remain focused on achieving sustainable profitable growth through existing operations and believe that the steps we have taken to monitor our costs, together with our funded backlog, will enable us to enhance market share and show overall growth in revenues and improvement in operating results going forward," concluded Ehrlich.
Cash Position at March 31, 2006
Cash-on-hand and cash equivalents, restricted collateral deposits and other restricted cash at the end of the quarter stood at $5.3 million in cash, $6.8 million in restricted collateral securities and restricted held-to-maturity securities due within one year and $525,000 in long term restricted deposits, as compared with $6.2 million in cash, $3.9 million in restricted collateral securities and restricted held-to-maturity securities due within one year and $779,000 million in long-term restricted securities and deposits at the end of 2005.
Backlog
The Company's backlog stood at $38.8 million at the end of the quarter and at $38.7 million at the end of April, 2006.
Stockholders' Equity
Stockholders' equity at the end of the quarter was approximately $47.6 million.
Nasdaq Update
Arotech is still awaiting a decision in respect of the April 27, 2006 Nasdaq Listing Qualifications Panel review of the Nasdaq Staff Determination regarding the proposed delisting of Arotech's stock from the Nasdaq National Market. Arotech will update the public promptly upon its receipt of a decision.
Conference Call
Arotech Corporation will hold a conference call to discuss its first quarter 2006 results, today, May 15, 2006, at 5:00 p.m. ET. Those wishing to take part in the conference call should call U.S. (800) 474-8920 or International 1 (719) 457 2727 a few minutes before the 5:00 p.m. ET start time. In addition, a replay option will be available Monday, May 15, 2006 at 8:00 p.m. ET until Wednesday, May 17, 2006 at 11:59 p.m. ET. The replay telephone number is U.S. (888) 203-1112 or International 1 (719) 457-0820. The replay passcode is: 6502914.
About Arotech Corporation
Arotech Corporation is a leading provider of quality defense and security products for the military, law enforcement and homeland security markets, including multimedia interactive simulators/trainers, lightweight armoring and advanced zinc-air and lithium batteries and chargers. Arotech operates through three major business divisions: Armor, Simulation and Training and Battery and Power Systems.
Arotech is incorporated in Delaware, with corporate offices in Ann Arbor, Michigan, and research, development and production subsidiaries in Alabama, Colorado, Michigan, California and Israel.
Except for the historical information herein, the matters discussed in this news release include forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, including the results of our restructuring program. Forward-looking statements reflect management's current knowledge, assumptions, judgment and expectations regarding future performance or events. Although management believes that the expectations reflected in such statements are reasonable, readers are cautioned not to place undue reliance on these forward-looking statements, as they are subject to various risks and uncertainties that may cause actual results to vary materially. These risks and uncertainties include, but are not limited to, risks relating to: the ineffectiveness of Arotech's internal control over financial reporting and disclosure controls and procedures; product and technology development; the uncertainty of the market for Arotech's products; changing economic conditions; delay, cancellation or non-renewal, in whole or in part, of contracts or of purchase orders; Arotech's ability to remain listed on the Nasdaq Stock Market in accordance with the Nasdaq's $1.00 minimum bid price and other continued listing standards; dilution resulting from issuances of Arotech's common stock upon conversion or payment of its outstanding convertible debt, which would be increasingly dilutive if and to the extent that the market price of Arotech's stock decreases; and other risk factors detailed in Arotech's most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2005 and other filings with the Securities and Exchange Commission. Arotech assumes no obligation to update the information in this release. Reference to the Company's website above does not constitute incorporation of any of the information thereon into this press release.
AROTECH CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three months ended March 31, ---------------------------- 2006 2005 --------------- ------------ Revenues $ 8,896,412 $10,387,445 Cost of revenues 6,452,752 6,371,874 --------------- ------------ Gross profit 2,243,660 4,015,571 Research and development 304,612 414,678 Selling and marketing expenses 899,268 1,158,820 General and administrative expenses 3,102,536 3,356,412 Amortization of intangible assets 510,692 823,088 Impairment of intangible assets 204,059 - --------------- ------------ Total operating costs and expenses 5,021,167 5,752,998 --------------- ------------ Operating loss (2,777,507) (1,737,427) Other income 17,506 - Financial expenses, net (1,461,136) (468,855) --------------- ------------ Loss before minority interest in loss (earnings) of subsidiaries, earnings from affiliated company and tax expenses (4,221,137) (2,206,282) Income taxes (39,972) (217,264) Earnings from affiliated company 38,472 - Minorities interest in loss (earnings) of subsidiaries 9,189 (32,954) --------------- ------------ Net loss (4,213,448) (2,456,500) Deemed dividend to certain stockholders (317,207) - --------------- ------------ Net loss attributable to common stockholders $(4,530,655) $(2,456,500) =============== ============ Basic and diluted net loss per share from continuing operations $ (0.05) $ (0.03) =============== ============ Basic and diluted net loss per share $ (0.05) $ (0.03) =============== ============ Weighted average number of shares used in computing basic net loss per share 90,722,273 80,102,089 =============== ============
Arotech Corporation Kim Kelly, 866-317-4677 kim@arotech.com www.arotech.com
I think it will recover and go to $10. Jmho.
10QSB/A: AMERICAN SECURITY RESOURCES CORP.
11:32 a.m. 05/15/2006 Provided by
(EDGAR Online via COMTEX) -- Item 2 - Management's Discussion and Analysis and Plan of Operation
Plan of Operation.
Management continues to provide funding and oversight to the Company's wholly-owned subsidiary, Hydra Fuel Cell Corp. During the first quarter, management raised over $750,000 through private placements of the Company's common stock to fund the development of the HydraStaxTM fuel cells which employ the Company's proprietary technology. Management expects to continue the funding of its fuel cell business through placements of its stock.
Management continues to review acquisition opportunities that would enhance its fuel cell offerings, expand its offerings in alternative energy production or represent opportunities in homeland security or national defense.
Management's Discussion and Analysis Results of Operations and Financial Condition
The Company had no revenues for the quarter ended March 31, 2005 and 2006.
The Company incurred $2,472,400 of general and administrative expenses for the three months ended March 31, 2006 as compared with $44,610 for the same period in 2005. In addition, the Company incurred $330,255 in research and development costs in its Hydra Fuel Cell subsidiary relating to the development of its HydraStax hydrogen fuel cell. These expenses include $2,273,084 of stock issued for compensation to outside vendors, contractors and certain officers and directors.
The Company had a net loss of $2,802,655, or $0.04 per share, for the three months ended March 31, 2006; as compared with a net loss of $44,610, or $0.00 per share for the three months ended March 31, 2005.
At March 31,2006, the Company had $412,130 of cash and cash equivalents.
CONTROLS AND PROCEDURES
Disclosure Controls and Procedures. The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company's disclosure controls and procedures are not effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, except that adjustments were required by our auditors in their review. We are reviewing our accounting procedures to ensure that future adjustments are not required.
Internal Control Over Financial Reporting. There have not been any changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
PRECAUTIONARY STATEMENT
This form 10-QSB contains statements which constitute forward-looking statements within the meaning of Section 27A of the Securities Act, as amended and Section 21E of the Securities Exchange Act of 1934. The words expect, anticipate, believe, goal, plan, intend, estimate, and similar expressions and variations thereof, if used, are intended to specifically identify forward-looking statements. Those statements appear in a number of places in this Form 10-QSB and in other places, particularly, Management's Discussion and Analysis of Financial Condition and Results of Operations, and include statements regarding our intent, belief or current expectations of our Company, our directors or officers with respect to, among other things: (i) our liquidity and capital resources; (ii) our financing opportunities and plans and (iii) our future performance and operating results. Investors and prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. The factors that might cause such differences include, among others, the following: (i) any material inability of us to successfully internally develop our products; (ii) any adverse effect or limitations caused by governmental regulations; (iii) any adverse effect on our continued positive cash flow and our abilities to obtain acceptable financing in connection with our growth plans; (iv) any increased competition in business;
May 15, 2006
(c) 1995-2006 Cybernet Data Systems, Inc. All Rights Reserved
ARTX.....A one-for-fourteen reverse split is to be considered and acted upon at the next annual meeting.
http://messages.yahoo.com/bbs?action=m&board=4687434&tid=efcx&mid=181551&sid=468 7434
If the reverse split goes into effect, they would divide your current number of shares by 14 to get your new number of shares. For example, if you now have 10,000 shares you would then have only 714.29 shares; today's $0.35/share would be increased to $4.90/share.The new lower number of shares times the new higher share price would remain the same as the old number of shares times the old share price. There is no advantage for the stockholders. The advantage for the company is that it would prevent delisting from the NASDAQ and make it easier for them to sell more warrants to raise more money - which would further dilute the value of the stockholders' investment.
It's NOT a good thing for the stockholders!
A one-for-fourteen reverse split is to be considered and acted upon at the next annual meeting.
http://messages.yahoo.com/bbs?action=m&board=4687434&tid=efcx&mid=181551&sid=468 7434
If the reverse split goes into effect, they would divide your current number of shares by 14 to get your new number of shares. For example, if you now have 10,000 shares you would then have only 714.29 shares; today's $0.35/share would be increased to $4.90/share.The new lower number of shares times the new higher share price would remain the same as the old number of shares times the old share price. There is no advantage for the stockholders. The advantage for the company is that it would prevent delisting from the NASDAQ and make it easier for them to sell more warrants to raise more money - which would further dilute the value of the stockholders' investment.
It's NOT a good thing for the stockholders!
Broad selloff on coppers.
HEC $.68. Time to load up big time.
HEC .68. Time to load up big time before everyone realizes how valuable this Company is.
Yes they did. Ouch!!!
bought more ARTX at .33. Earnings on Monday.
BCON - Huge Insider Buys just reported.
Huge Insider Buys just reported.
ARTX .39. Good entry point. eom.
TGB Earnings News. $3.91 in pretrading.
Taseko Q2 EPS Up Vs Year Ago - Shares Down But Off Lows
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Midnight Trader
08:37 a.m. 05/11/2006
Boston, May 11, 2006 (MidnightTrader via COMTEX) -- Taseko (TGB) says it realized revenues of $31.2 million and $6.3 million from sales of copper and molybdenum concentrates during Q2, respectively.
It earned $0.03 per share, up from a penny a year ago.
Price: 3.98, Change: -0.03, Percent Change: -0.75
http://www.midnighttrader.com
TGB News
Taseko Q2 EPS Up Vs Year Ago - Shares Down But Off Lows
--------------------------------------------------------------------------------
Midnight Trader
08:37 a.m. 05/11/2006
Boston, May 11, 2006 (MidnightTrader via COMTEX) -- Taseko (TGB) says it realized revenues of $31.2 million and $6.3 million from sales of copper and molybdenum concentrates during Q2, respectively.
It earned $0.03 per share, up from a penny a year ago.
Price: 3.98, Change: -0.03, Percent Change: -0.75
http://www.midnighttrader.com
TGB $4.24 AH eom.
ARSC News. eom.
$4.24 AHrs.
Someone bought 50k shres at .78 at the close. Smart decison imho. This seems to be the support range and the earnings was just a short term turbulence.
Stay on the sidelines until reports for this stock are readily avail like for HEC and QEE and TGB.
Strong close ?
First Quarter Revenues Increase 34%, Operating Margin Increases 28%
Harken Energy Corporation (AMEX: HEC) today reported quarterly financial results for the period ended March 31, 2006. During the period ended March 31, 2006, Harken's balance sheet remained strong. Harken ended the first quarter of 2006 with approximately $40 million in Cash and Short Term Investments and positive Working Capital of approximately $38 million. Total revenues in the first quarter of 2006 increased to approximately $9.9 million, an increase of 34% over the first quarter of 2005, due primarily to higher oil and gas prices. Non-GAAP Operating Margin increased to $3.2 million in the first quarter of 2006, representing 28% growth over the prior year. The following is a summary of Harken's Results of Operations for the period ended March 31, 2006, as compared to the prior year period:
Three Months Ended
March 31,
------------------
2005 2006
----------- -----------
Total Revenues and Other $ 7,347,000 $ 9,877,000
Oil and Gas Operating Expenses 2,206,000 3,212,000
General and Administrative Expenses 2,660,000 3,491,000
----------- -----------
Operating Margin (Non-GAAP; see
reconciliation below) 2,481,000 3,174,000
Depreciation, Depletion and Amortization 2,601,000 3,359,000
Share-based Compensation Expense 2,020,000 2,184,000
Increase in Global Warrant liability 3,796,000 -
Accretion Expense 92,000 101,000
Interest Expense and Other, net 269,000 368,000
Income Tax Expense 206,000 239,000
Minority Interest in Subsidiary (287,000) (2,175,000)
Cumulative Effect of a Change in Accounting
Principle - 868,000
----------- -----------
Net Loss $(6,216,000) $(1,770,000)
Accrual of Dividends Related to Preferred Stock (304,000) (57,000)
Modification of Preferred Stock and Common Stock
Warrants (90,000) (1,147,000)
----------- -----------
Net Loss Attributed to Common Stock $(6,610,000) $(2,974,000)
=========== ===========
Basic and Diluted Loss per Common Share $ (0.03) $ (0.01)
Basic and Diluted Weighted Average Shares
Outstanding 218,312,672 223,558,168
Operating Summary
Harken's domestic operations are conducted through its wholly owned subsidiary, Gulf Energy Management Company ("GEM"). GEM's operations consist of exploration, exploitation, development, production and acquisition efforts in the United States, principally in the onshore and offshore Gulf Coast regions of South Texas and Louisiana, as well as coal bed methane exploration and development activities in Indiana and Ohio. Harken has exposure to international crude oil exploration and production operations through its holding of approximately 34% of Global Energy Development PLC's ("Global") outstanding common shares. Global is listed on the AIM Market of the London Stock Exchange. Global has exploration, development and production activities in Colombia, and exploration activities in Panama and Peru. Harken's consolidated revenues are primarily derived from production from GEM's and Global's oil and gas properties.
Balance Sheet Summary:
December 31, March 31,
2005 2006
----------- -----------
(unaudited)
Current ratio (1) 4.13 to 1 4.16 to 1
Working capital (2) $45,163,000 $38,190,000
Cash and short term investments $46,235,000 $39,839,000
Total debt $12,500,000 $12,500,000
Cash and short-term investments less debt $33,735,000 $27,339,000
Stockholders' equity $92,162,000 $89,660,000
Total debt to equity 0.14 to 1 0.14 to 1
(1) Current ratio is calculated as current assets divided by current
liabilities
(2) Working capital is the difference between current assets and current
liabilities
Share-Based Compensation Expense
A significant item in Harken's consolidated results of operations for the period ended March 31, 2006, as compared to the prior year period, was the cumulative effect of the change in accounting principle required by the adoption of Statement of Financial Accounting Standard No. 123 (As Amended) "Accounting for Share-Based Compensation" ("SFAS 123®") related to Global's share option plan. Global's common shares are traded on the AIM Market of the London Stock Exchange. Generally, SFAS 123® requires companies to measure and recognize in the financial statements compensation expense for share-based awards granted to employees based on the fair value of the award. Effective January 1, 2006, Harken adopted SFAS 123® and recognized a non-cash compensation expense of approximately $868,000 for the cumulative effect of the change in accounting principle representing the change in fair value of Global's granted share options from the date of grant up to January 1, 2006. Harken also recognized approximately $2.2 million of share-based compensation expense for the change in fair value of the share options during the quarter ended March 31, 2006. Under US GAAP, share options must be remeasured to fair value each reporting period with the change in fair value recognized in the statement of operations as an increase or decrease to compensation expense.
Gulf Energy Management Company (GEM)
GEM's oil and gas revenues during the first quarter of 2006 were generated from the operations in the onshore and offshore areas of the Texas and Louisiana Gulf Coast. During the first quarter of 2006, GEM's oil and gas revenues increased 19% to approximately $5.7 million, compared to $4.8 million for the prior year period primarily due to an increase in average oil and gas commodity prices received as compared to the prior year period. GEM's natural gas revenue increased 40% to approximately $3.7 million during the first quarter 2006, as compared to $2.6 million during the first quarter 2005, due to the $2.31 increase in average gas prices received from sales in the first quarter 2006. Also, natural gas volumes increased 4% from 396,000 mcf in the first quarter 2005 to 412,000 mcf for the first quarter 2006. This volume increase was attributed to new production at Allen Ranch field and improved production at Lapeyrouse field. GEM experienced a 26% decrease in oil sales and production volumes in the first quarter of 2006, as compared to the prior year period, due to the effects of the hurricanes at Main Pass 35, which occurred late in 2005. As of May 2006, GEM's net domestic production rate was at approximately 7.8 million cubic feet equivalent of natural gas per day. Prior to the hurricanes, GEM's net domestic production rate was approximately 7.6 million cubic feet equivalent of natural gas per day.
GEM's oil and gas operating expense increased 32% to approximately $2 million during the first quarter of 2006 from approximately $1.5 million during the first quarter 2005 primarily due to the cost of insurance, continuing repair costs related to storms of 2005 and demand-driven price increases for oilfield services and equipment associated with increased oilfield activity especially associated with offshore Louisiana.
Global Energy Development PLC (Global)
During the first quarter of 2006, as compared to the first quarter of 2005, Global experienced an increase in oil revenues, increased operating expenses and steady oil volumes. Global's first quarter of 2006 revenue was primarily related to production from its Bolivar, Alcaravan and Bocachico Association Contract Areas located in Colombia, South America.
Global's oil revenues increased approximately 48% from $2.5 million in the first quarter of 2005 to $3.7 million during the first quarter of 2006. Oil sales volumes remained steady at approximately 78,000 net barrels during both periods ended March 31, 2005 and 2006. Global's average oil commodity prices increased 48% to $47.99 during the first quarter 2006, compared to $32.33 during the first quarter 2005.
Global's operating expenses increased 73% from approximately $729,000 in the first quarter of 2005, to approximately $1.3 million during the first quarter of 2006, primarily due to increased equipment rentals and diesel fuel costs. Diesel fuel costs have continued to rise with the increase in the price of crude oil.
International Business Associates (IBA)
IBA's net loss for the period ended March 31, 2006 totaled approximately $616,000 compared to a net loss of $1 million for the period ended March 31, 2005. In February 2006, IBA redeemed 7,500 shares of its Series A Redeemable Preferred Stock, $0.01 par value per share, along with 24 shares of IBA common stock, $0.01 par value per share, held by Harken in exchange for cash consideration of $7.5 million.
More information is available in Harken Energy Corporation's Form 10-Q for the period ended March 31, 2006 which may be accessed through the Company's website at www.harkenenergy.com.
NON-GAAP FINANCIAL MEASURE
Reconciliation of Operating Margin to Net Loss
Three Months Ended
March 31,
------------------
2005 2006
----------- -----------
Net Loss (GAAP) $(6,216,000) $(1,770,000)
Cumulative Effect of a Change in Accounting
Principles - 868,000
Minority Interest in Subsidiary (287,000) (2,175,000)
Income Tax Expense 206,000 239,000
Interest Expense and Other, Net 269,000 368,000
Accretion Expense 92,000 101,000
Increase in Global Warrant Liability 3,796,000 -
Share-Based Compensation Expense 2,020,000 2,184,000
Depreciation, Depletion and Amortization 2,601,000 3,359,000
----------- -----------
Operating Margin $ 2,481,000 $ 3,174,000
=========== ===========
Management believes the presentation of this non-GAAP financial measure, in connection with the results for the three months ended March 31, 2006, provides useful information to investors regarding the Company's results of operations. Management also believes that this non-GAAP financial measure provides a picture of Harken's results that is comparable among reporting periods and provides factors that influenced performance during the period under the report. This non-GAAP financial measure should be considered in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP.
Harken Energy Corporation is engaged in oil and gas exploration, development and production operations both domestically and internationally through its various subsidiaries and shareholdings. Additional information may be found at the Harken Energy Web site, www.harkenenergy.com. Please e-mail all investor inquiries to HECinquiries@ctapr.com.
Certain statements in this announcement and inferences derived therefrom may be regarded as "forward-looking statements" within the meaning of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on the opinions and estimates of management at the time the statements are made. Management's current view and plans, however, are subject to numerous known and unknown risks, uncertainties and other factors that may cause the actual results, performance, timing or achievements of Harken to be materially different from any results, performance, timing or achievements expressed or implied by such forward-looking statements. The various uncertainties, variables, and other risks include those discussed in detail in the Company's SEC filings, including the Annual Report on Form 10-K filed on February 28, 2006. Harken undertakes no duty to update or revise any forward-looking statements. Actual results may vary materially.
Source: Market Wire (May 9, 2006 - 12:51 PM EDT)
News by QuoteMedia
www.quotemedia.com
Awesome improvement!!!
WASHINGTON (Dow Jones)--Harken Energy Corp. (HEC) on Tuesday reported a first-quarter net loss of $1.8 million, or 1 cent a share, narrowing from the net loss of $6.2 million, or 3 cents a share, that it posted a year ago.
Net loss attributed to common stock for the quarter was $3 million, narrowing from $6.6 million.
According to its quarterly report filed with the Securities and Exchange Commission, the company had revenue of $9.9 million for the period ended March 31, up from $7.3 million a year earlier.
Harken Energy is an oil and gas company.
-By Patricia Kowsmann, Dow Jones Newswires; 202-862-1350; patricia.kowsmann@dowjones.com
HEC Earnings just released.
Huge buys at .03!!!
HEC Earnings news NOW!!!
http://www.investorshub.com/boards/read_msg.asp?message_id=11024614
HEC Earnings news NOW!!!
http://www.investorshub.com/boards/read_msg.asp?message_id=11024614
HEC Earnings news NOW!!!
http://www.investorshub.com/boards/read_msg.asp?message_id=11024614
HEC Earnings news NOW!!!
http://www.investorshub.com/boards/read_msg.asp?message_id=11024614
HEC Earnings NEWS NOW!!!!
10-Q: HARKEN ENERGY CORP
--------------------------------------------------------------------------------
Edgar Online
11:36 a.m. 05/09/2006
(EDGAR Online via COMTEX) -- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Unaudited)
The following discussion is intended to assist you in understanding our business and the results of our operations. It should be read in conjunction with the Consolidated Condensed Financial Statements and the related notes that appear elsewhere in this report as well as our Annual Report on Form 10-K for the year ended December 31, 2005. Certain statements made in our discussion may be forward looking. Forward-looking statements involve risks and uncertainties and a number of factors could cause actual results or outcomes to differ materially from our expectations. These risks, uncertainties, and other factors include, among others, the risks described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2005 filed with the Securities and Exchange Commission, as well as other risks described in this Quarterly Report. Unless the context requires otherwise, when we refer to "we," "us" and "our," we are describing Harken Energy Corporation and its consolidated companies on a consolidated basis.
OVERVIEW
We are an independent oil and gas exploration, exploitation, development and production company who seeks to invest in energy-based growth opportunities. Our domestic operations are conducted through our wholly-owned subsidiary, Gulf Energy Management Company ("GEM"). GEM's operations consist of exploration, exploitation, development, production and acquisition efforts in the United States, principally in the onshore and offshore Gulf Coast regions of South Texas and Louisiana, as well as coal bed methane exploration and development activities in Indiana and Ohio. We have exposure to Latin American crude oil exploration and production operations through our ownership of approximately 34% of Global Energy Development PLC's ("Global") ordinary shares. Global has exploration, development and production activities in Colombia and exploration activities in Panama and Peru.
During 2005, we were also engaged in minimal energy trading through our investment in International Business Associates, Ltd. ("IBA"), which focuses primarily on trading energy futures or other energy-based contracts, principally in the United States. During 2005, IBA had a low volume of trading activities and was unsuccessful in obtaining trading contracts overseas. In February 2006, IBA redeemed 7,500 shares of our IBA convertible preferred shares along with our 24 shares of IBA common stock in exchange for cash consideration
of $7.5 million. Due to the nature of their business, we can not be certain that IBA will secure trading contracts in the future.
Our consolidated revenues are primarily derived from production from GEM's and Global's oil and gas properties. GEM operates approximately 50% of its natural gas and crude oil properties which are all located in the United States. Global operates 100% of its crude oil producing properties which are all located in Colombia. Our revenues are a function of the oil and gas volumes produced and the prevailing commodity price at the time of production, and certain quality and transportation discounts. The commodity prices for crude oil and natural gas as well as the timing of production volumes have a significant impact on our operating income. From time-to-time, GEM enters into hedging contracts to achieve more predictable cash flows and to reduce exposure to declines in market prices.
As of March 31, 2006, GEM represented 61% of our consolidated oil and gas revenues. During the three months ended March 31, 2006, GEM's oil and gas revenues were comprised of approximately 36% oil sales and 64% natural gas sales. Substantially all of GEM's production is concentrated in five oil and gas fields along the onshore and offshore Texas and Louisiana Gulf Coast.
Revenues from Global are derived solely from Global's Colombian oil production. During the three months ended March 31, 2006, Global produced approximately 78 thousand net barrels of oil in Colombia generating oil revenues of approximately $3.7 million. Global represented approximately 39% of our consolidated oil and gas revenues during the three months ended March 31, 2006. Global's activities in Panama and Peru, thus far, have been limited to technical evaluations of potential exploration areas.
DECONSOLIDATION OF GLOBAL
At December 31, 2005 and March 31, 2006, Harken owned approximately 34% of Global's ordinary shares. At March 31, 2006, Lyford Investments Enterprises Ltd. ("Lyford"), owned 17.01% of the ordinary shares of Global and also beneficially owned approximately 30% of the combined voting power of Harken's common stock. Lyford's representative, Alan Quasha, is the Chairman of Harken's Board of Directors. Harken's direct equity interest of 33.67%, combined with Lyford's 17.01% equity interest in Global and the previous sharing of certain management and administrative functions between Global and Harken, were deemed to provide Harken with the legal power to control the operating policies and procedures of Global as of March 31, 2006, which required Harken to consolidate the operations of Global as of such date.
In April 2006, Global advised Harken that Lyford had sold a portion of its equity interest in Global. As of May 9, 2006 Lyford owned 15.84% of the ordinary shares in Global such that Harken's direct equity interest in Global, combined with Lyford's direct equity interest in Global, has been reduced to less than 50% of Global's outstanding voting securities. Based upon this reduction in ownership and the elimination of shared management and administrative functions between Harken and Global, Harken has determined that it no longer has the legal power to control the operating policies and procedures of Global and that Harken will be required to deconsolidate Global from its consolidated financial statements effective with its current fiscal quarter ending June 30, 2006. We are currently evaluating the impact of both the change in our influence on Global's operations and the future timing and availability of financial information from this entity to determine whether this investment will be carried as a cost or equity investment going forward.
GEM'S OPERATIONS:
As of May 9, 2006, GEM's net domestic production rate was at approximately 7.8 million cubic feet equivalent of natural gas per day. Prior to the hurricanes, GEM's net domestic production rate was approximately 7.6 million cubic feet equivalent of natural gas per day. While we continue to experience production losses as a result of the hurricanes, we have restored and/or enhanced production in other fields. The following field data updates the status of GEM's domestic operations through the end of April 2006:
Lapeyrouse Field, Terrebonne Parish - Louisiana
GEM holds an average non-operated working interest of 8.2% in eight wells in this field. During the first quarter of 2006, GEM has participated in two additional workovers in the field. As a result of these activities, gross field production increased from 20 million cubic feet equivalent to approximately 28 million cubic feet equivalent of natural gas per day. A ninth well, with first production in late March 2006, has experienced some increased water and is currently shut-in for a workover scheduled for May 2006. GEM holds an approximately 39% operated working interest in this ninth well.
Main Pass, Plaquemines Parish - Louisiana
Production has been increased to approximately 475 gross barrels of oil per day ("bopd"). GEM has a 90% interest in Main Pass and is the field operator. During the third quarter of 2005, GEM completed a major overhaul and rebuild of an additional compressor for the field. Repair work on a second rental compressor damaged by the hurricane is now completed. Now that both compressors are operational, GEM plans to add additional wells to the gas lift cycle. Gross production for the field is expected to reach approximately 500 bopd after additional wells are gas lifted. GEM continues its geological and geophysical study in the area, utilizing its license to 21 square miles of 3D seismic data, covering the area held by production leases.
Raymondville Field, Willacy and Kenedy Counties - Texas
During the first quarter of 2006, GEM participated in additional recompletions that resulted in a temporary increase in gross production for the field. As previously disclosed, it is expected that field production will resume its decline rate. Currently gross production for this field is approximately 8 million cubic feet equivalent of natural gas per day. GEM has an average 27% non-operated working interest in this field.
Lake Raccourci Field, Lafourche Parish - Louisiana
GEM holds a 40% operated working interest in each of its Lake Raccourci wells. Gross production for this field is approximately 2.8 million cubic feet equivalent of natural gas per day. The State Lease 14589 #2 is currently shut-in, waiting on a workover rig scheduled for the second quarter of 2006. Upon completion of the workover, gross production is expected to return to about 5.0 million cubic feet equivalent of natural gas per day. GEM is presently seeking industry partners to drill a field extension well.
3D Seismic Licenses - Louisiana
GEM continues to evaluate its seismic licenses covering approximately 155 square miles of 3D seismic data in three different surveys across south Louisiana. A number of leads have developed in this continuing study. The process of cataloging and prioritizing the seismic data is ongoing.
South Beach Field, Chambers County - Texas
GEM has a non-operated working interest of 10% in this area. Gross production for this field is approximately 3.7 million cubic feet equivalent of natural gas per day.
Branville Bay Field, Plaquemines Parish - Louisiana
This non-operated property remains 100% shut-in from the hurricanes in late 2005. Repairs to the production facility are underway and production is expected to resume in the second quarter of 2006. GEM has a non-operated working interest of 12.5% in this area.
Point-a-la-Hache Field, Plaquemines Parish - Louisiana
This operated property also remains 100% shut-in. Damages to this field principally affected a leased production barge facility. Repairs to the production barge are expected to be completed in the second quarter 2006. GEM maintains a 25% operated working interest in the area.
Point-au-Fer Field, Terrebonne Parish - Louisiana
In 2005, GEM entered into a Participation Agreement and Joint Operating Agreement covering an area of mutual interest of approximately 56 square miles. In addition, during the fourth quarter of 2005, GEM participated in an acquisition of two wells with production potential, and a central facility. GEM owns a 12.5% non-operated working interest in the area. Two wells were drilled in the first quarter of 2006. The first well has been flow tested at about 2.75 million gross cubic feet equivalent of natural gas per day, and is waiting on hook-up to facilities. The second well has been logged productive and cased. A completion rig is expected in the second quarter of 2006. One workover and recompletion of an existing well is expected to commence in May 2006. A second workover is planned for the late second quarter of 2006. Several prospects have been identified in the area, and GEM expects to have additional drilling and workover activity in this area during 2006.
Allen Ranch Field, Colorado County - Texas
GEM owns an 11.25% non-operated working interest in the area. The initial well, the Hancock Gas Unit # 1, was productive in four sands and has been producing approximately 2.5 million gross cubic feet equivalent of natural gas per day. As a result of the success with the first well, the Hancock Gas Unit # 2 was drilled in October 2005 as an offset to the first well. This second well was logged as productive in the same four sands as the Hancock Gas Unit # 1 well and two deeper zones were also logged as productive. The deeper of the two zones has been fracture stimulated and produced about 5.0 million cubic feet equivalent of natural gas per day. This zone has now been shut-in to test the other productive zone in the well bore and a temporary bridge plug was set above the sand to protect the zone while additional testing continues. The second zone has been perforated and is scheduled for fracture stimulation in the second quarter 2006.
Coalbed Methane Prospects - Indiana and Ohio
In 2005, GEM entered into two significant Exploration and Development Agreements in Indiana and Ohio. Each prospect provides for an area of mutual interest of approximately 400,000 acres. During the first quarter of 2006, GEM has entered into another Exploration and Development Agreement in Ohio. This
prospect provides for an area of mutual interest of approximately 20,000 acres. In each case, the agreements provide for a phased delineation, pilot and development program with corresponding staged expenditures. Contracted third parties with a long track record in successful Coalbed Methane development are providing expert advice for these projects.
Indiana Prospect
In September 2005, after the submission of a Phase I core evaluation report by the technical consultant, GEM elected to proceed and fund pilot well drilling under Phase II of the agreement. Due to limited availability of needed equipment, GEM expects the drilling of the pilot wells to occur during the second quarter of 2006.
Ohio Cumberland Prospect
Core samples from the Ohio CBM prospect are being analyzed for gas content, gas composition and characteristics of the coal. Depending on final results, GEM may elect to schedule drilling of pilot wells on its Ohio CBM prospect area during 2006.
Ohio Triangle Prospect
Core samples are expected to be obtained on this third prospect late in the second quarter of 2006. Depending on final results of core analysis, GEM may elect to schedule drilling of pilot wells on this CBM prospect area during 2006.
GLOBAL'S OPERATIONS:
Revenues from Global are derived solely from its Colombian oil production. During the three months ended March 31, 2006, Global increased its revenues compared to the corresponding prior year period due to increased crude oil prices. Global production volumes remained steady during both periods.
In April 2006, Global signed a new exclusive Exploration and Production Concession contract for the Los Sauces area ("Los Sauces Contract") with the National Hydrocarbons Agency of the Republic of Colombia.
The Los Sauces Contract covers approximately 61,600 acres in the Central Llanos region of Colombia where Global already has three contracts, namely the Alcaravan Association contract and the Rio Verde and Los Hatos Exploration and Production Concession contracts. The Los Sauces Contract is contiguous with the northern boundary of the Rio Verde contract.
Global will own 100% of the Los Sauces Contract subject only to an initial 10.5% royalty, with the future size of the royalty to be determined by future production levels. The Los Sauces Contract, effective from March 31, 2006, has a principal term of thirty years divided into an initial six-year exploration phase and a 24-year exploitation and production phase. Under the terms of the Los Sauces Contract, Global must within twelve months reprocess approximately 200 kilometers of existing seismic, acquire and process 50 kilometers of 2D seismic, and drill one exploratory well.
Global can, at its election, proceed to phase 2, twelve months in duration, and drill one exploratory well. Phases 3 to 6, also all optional and twelve months in length, require the drilling of an exploratory well in each phase.
The Los Sauces area has been subject to prior drilling activity by an international oil company over ten years ago at which time the La Totuma #1 well was drilled with reported oil shows. Based upon the existing formation and seismic data, Global has elected to position and drill an exploratory well geologically updip from the existing La Totuma #1 well in the second half of 2006.
CAPITAL STRUCTURE
Effect of Convertible Debt and Equity Instruments on Dilution
As of March 31, 2006, on a consolidated basis, we had cash and short term investments of $40 million and working capital of $38 million (including $4 million cash held by Global). We had approximately $90 million in shareholders' equity at March 31, 2006.
At March 31, 2006, if our remaining outstanding debt, convertible preferred stock and common stock purchase warrants were exercised and/or converted, we would be required to issue the following amounts of our common stock:
Conversion / Shares of Common Exercise Stock Issuable at Instrument Price (a) March 31, 2006 Series M Preferred $ 0.59 8,389,831 Series G1 Preferred $ 12.50 12,800 Series G2 Preferred $ 3.00 33,333 Series L Warrants $ 0.67 3,182,836 Series M Warrants $ 0.57 4,385,965 Common Stock Potentially Issued Upon Conversion / Exercise 16,004,765
CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
Our consolidated condensed financial statements have been prepared in accordance with United States generally accepted accounting principles ("US GAAP") which requires us to use estimates and make assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Our estimates and assumptions are based on historical experience, industry conditions and various other factors which we believe are appropriate. Actual results could vary significantly from our estimates and assumptions as additional information becomes known. The more significant critical accounting estimates and assumptions are described below.
Asset Retirement Obligations - Our asset retirement obligations represent our best estimate of the fair value of our future abandonment costs associated with our oil and gas properties, including the costs of removal and disposition of tangible equipment, site and environmental restoration. We estimate the fair value of our retirement costs in the period in which the liability is incurred, if a reasonable estimate can be made. The determination of the fair value of an asset retirement obligation generally involves estimating the fair value of the obligation at the end of the property's useful life and then discounting it to present value using our credit adjusted, risk free rate of return. Estimating future asset removal costs is difficult and requires management to make estimates and judgments regarding the expected removal and site restoration costs, timing and present value discount rates. Valuations of the estimated useful life and the fair value of the asset retirement obligation are imprecise since the removal activities will generally occur several years in the future and asset removal technologies and costs are constantly changing, as are political, environmental and safety considerations that may ultimately impact the amount of the obligations.
Derivative Instruments - We are exposed to the risk of fluctuations in crude oil and natural gas prices. To reduce the impact of this risk in earnings and to increase the predictability of our cash flow, from time to time we enter into certain derivative contracts (primarily option floors) for a portion of our North American oil and gas production. As required by Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"), we are required to record all derivative contracts at fair value in our balance sheet. Changes in fair value are required to be recorded in income or other comprehensive income, depending on the hedging designation and the hedge effectiveness. Our estimates of fair value are based on market quotes from third parties. While the fair values of our derivatives have fluctuated significantly, our estimates of fair value have historically been consistent with the settlement amounts.
Fair value of our debt and equity transactions -Many of our various debt and equity transactions require us to determine the fair value of a debt or equity instrument in order to properly record the transaction in our financial statements. We historically have utilized independent third parties to assist us in determining the fair value of many of our transactions. Fair value is generally determined by applying widely acceptable valuation models, (e.g., the Black-Scholes valuation model) using the trading price of the underlying instrument or by comparison to instruments with comparable maturities and terms.
Consolidation of variable interest entities - In January 2003, the FASB issued FASB Interpretation No. ("FIN") 46, "Consolidation of Variable Interest Entities" ("FIN 46"), which requires the primary beneficiary of a variable interest entity's ("VIE") activities to consolidate the VIE. FIN 46 defines a VIE as an entity in which the equity investors do not have substantive voting rights and there is not sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. The primary beneficiary is the party that absorbs a majority of the expected losses and/or receives a majority of the expected residual returns of the VIE's activities. In December 2003, the FASB issued FIN 46(R), which supercedes and amends certain provisions of FIN 46. While FIN 46(R) retained many of the concepts and provisions of FIN 46, it also provides additional guidance related to the application of FIN 46, provides for certain additional scope exceptions, and incorporates several FASB Staff Positions issued related to the application of FIN 46. As of March 31, 2006, Harken owned less than a majority of the common shares of Global but did possess the legal power to direct the operating policies and procedures of Global through our direct ownership, combined with the 20% ownership by Lyford in Global shares. In addition, Harken has concluded that Global was not a VIE at March 31, 2006 as contemplated by FIN 46(R). During the three months ended March 31, 2006, we had an investment in a VIE named IBA, which we consolidated in accordance with FIN 46(R). See Note 3 - "Investment in International Business Associates, Ltd." in the notes to the Consolidated Condensed Financial Statements for information regarding the consolidation of IBA.
STOCK-BASED COMPENSATION
Adoption of Statement of Financial Accounting Standard No. 123 (As Amended)
Effective January 1, 2006, Harken and its consolidated companies adopted SFAS No. 123 (as amended) "Accounting for Share-Based Compensation" ("SFAS 123(R)") using the modified prospective transition method. In addition, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 107 "Share-Based Payment" ("SAB 107") in March, 2005, which provides supplemental SFAS 123(R) application guidance based on the views of the SEC. Under the modified prospective transition method, compensation cost recognized in the quarterly period ended March 31, 2006 includes: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, and (b) compensation cost for all share-based payments granted beginning January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123(R). In accordance with the modified prospective transition method, results for prior periods have not been restated.
The adoption of SFAS 123(R) resulted in an adjustment for cumulative effect in change in accounting principles on the consolidated condensed statement of operations ended March 31, 2006 for the amount of $868 thousand. This adjustment was recorded as a decrease to Net Income. The Company did not recognize a tax benefit from the cumulative effect adjustment because Global, the only entity impacted by SFAS 123 (R), currently has net operating losses that will prevent any tax benefit being received from any exercised options. In accordance with SFAS 123(R) the company will not recognize the tax benefits and/or credits to additional paid in capital for any additional deduction until the deduction actually reduces the taxes payable.
RECENT ACCOUNTING PRONOUNCEMENTS
On February 16, 2006, the FASB issued Statement 155, "Accounting for Certain Hybrid Instruments- an amendment of FASB Statements No. 133 and 140." The statement amends Statement 133 to permit fair value measurement for certain hybrid financial instruments that contain an embedded derivative, provides additional guidance on the applicability of Statement 133 and 140 to certain financial instruments and subordinated concentrations of credit risk. The new standard is effective for the first fiscal year that ends after September 15, 2006. Harken is currently evaluating the impact this new Standard will have on the Company.
RESULTS OF OPERATIONS
For the purposes of discussion and analysis, we present a summary of our consolidated condensed results of operations followed by a more detailed discussion and analysis of our segments.
Consolidated Condensed Statement of Operations Comparisons Net loss and per-share amounts for each of the periods ended March 31, 2005 and 2006, were as follows: Three Months Ended March 31, (Thousands of dollars, except per-share amounts) 2005 2006 (unaudited) Net loss $ (6,216 ) $ (1,770 ) Net loss attributed to common stock $ (6,610 ) $ (2,974 ) Net loss per share - Basic $ (0.03 ) $ (0.01 ) Diluted $ (0.03 ) $ (0.01 )
The primary components of our net loss for the period ended March 31, 2005 compared to the net loss for the period ended March 31, 2006 are outlined in the table below:
Favorable (Unfavorable) . . .
May 09, 2006
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HEC Earnings NEWS NOW!!!!
10-Q: HARKEN ENERGY CORP
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Edgar Online
11:36 a.m. 05/09/2006
(EDGAR Online via COMTEX) -- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Unaudited)
The following discussion is intended to assist you in understanding our business and the results of our operations. It should be read in conjunction with the Consolidated Condensed Financial Statements and the related notes that appear elsewhere in this report as well as our Annual Report on Form 10-K for the year ended December 31, 2005. Certain statements made in our discussion may be forward looking. Forward-looking statements involve risks and uncertainties and a number of factors could cause actual results or outcomes to differ materially from our expectations. These risks, uncertainties, and other factors include, among others, the risks described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2005 filed with the Securities and Exchange Commission, as well as other risks described in this Quarterly Report. Unless the context requires otherwise, when we refer to "we," "us" and "our," we are describing Harken Energy Corporation and its consolidated companies on a consolidated basis.
OVERVIEW
We are an independent oil and gas exploration, exploitation, development and production company who seeks to invest in energy-based growth opportunities. Our domestic operations are conducted through our wholly-owned subsidiary, Gulf Energy Management Company ("GEM"). GEM's operations consist of exploration, exploitation, development, production and acquisition efforts in the United States, principally in the onshore and offshore Gulf Coast regions of South Texas and Louisiana, as well as coal bed methane exploration and development activities in Indiana and Ohio. We have exposure to Latin American crude oil exploration and production operations through our ownership of approximately 34% of Global Energy Development PLC's ("Global") ordinary shares. Global has exploration, development and production activities in Colombia and exploration activities in Panama and Peru.
During 2005, we were also engaged in minimal energy trading through our investment in International Business Associates, Ltd. ("IBA"), which focuses primarily on trading energy futures or other energy-based contracts, principally in the United States. During 2005, IBA had a low volume of trading activities and was unsuccessful in obtaining trading contracts overseas. In February 2006, IBA redeemed 7,500 shares of our IBA convertible preferred shares along with our 24 shares of IBA common stock in exchange for cash consideration
of $7.5 million. Due to the nature of their business, we can not be certain that IBA will secure trading contracts in the future.
Our consolidated revenues are primarily derived from production from GEM's and Global's oil and gas properties. GEM operates approximately 50% of its natural gas and crude oil properties which are all located in the United States. Global operates 100% of its crude oil producing properties which are all located in Colombia. Our revenues are a function of the oil and gas volumes produced and the prevailing commodity price at the time of production, and certain quality and transportation discounts. The commodity prices for crude oil and natural gas as well as the timing of production volumes have a significant impact on our operating income. From time-to-time, GEM enters into hedging contracts to achieve more predictable cash flows and to reduce exposure to declines in market prices.
As of March 31, 2006, GEM represented 61% of our consolidated oil and gas revenues. During the three months ended March 31, 2006, GEM's oil and gas revenues were comprised of approximately 36% oil sales and 64% natural gas sales. Substantially all of GEM's production is concentrated in five oil and gas fields along the onshore and offshore Texas and Louisiana Gulf Coast.
Revenues from Global are derived solely from Global's Colombian oil production. During the three months ended March 31, 2006, Global produced approximately 78 thousand net barrels of oil in Colombia generating oil revenues of approximately $3.7 million. Global represented approximately 39% of our consolidated oil and gas revenues during the three months ended March 31, 2006. Global's activities in Panama and Peru, thus far, have been limited to technical evaluations of potential exploration areas.
DECONSOLIDATION OF GLOBAL
At December 31, 2005 and March 31, 2006, Harken owned approximately 34% of Global's ordinary shares. At March 31, 2006, Lyford Investments Enterprises Ltd. ("Lyford"), owned 17.01% of the ordinary shares of Global and also beneficially owned approximately 30% of the combined voting power of Harken's common stock. Lyford's representative, Alan Quasha, is the Chairman of Harken's Board of Directors. Harken's direct equity interest of 33.67%, combined with Lyford's 17.01% equity interest in Global and the previous sharing of certain management and administrative functions between Global and Harken, were deemed to provide Harken with the legal power to control the operating policies and procedures of Global as of March 31, 2006, which required Harken to consolidate the operations of Global as of such date.
In April 2006, Global advised Harken that Lyford had sold a portion of its equity interest in Global. As of May 9, 2006 Lyford owned 15.84% of the ordinary shares in Global such that Harken's direct equity interest in Global, combined with Lyford's direct equity interest in Global, has been reduced to less than 50% of Global's outstanding voting securities. Based upon this reduction in ownership and the elimination of shared management and administrative functions between Harken and Global, Harken has determined that it no longer has the legal power to control the operating policies and procedures of Global and that Harken will be required to deconsolidate Global from its consolidated financial statements effective with its current fiscal quarter ending June 30, 2006. We are currently evaluating the impact of both the change in our influence on Global's operations and the future timing and availability of financial information from this entity to determine whether this investment will be carried as a cost or equity investment going forward.
GEM'S OPERATIONS:
As of May 9, 2006, GEM's net domestic production rate was at approximately 7.8 million cubic feet equivalent of natural gas per day. Prior to the hurricanes, GEM's net domestic production rate was approximately 7.6 million cubic feet equivalent of natural gas per day. While we continue to experience production losses as a result of the hurricanes, we have restored and/or enhanced production in other fields. The following field data updates the status of GEM's domestic operations through the end of April 2006:
Lapeyrouse Field, Terrebonne Parish - Louisiana
GEM holds an average non-operated working interest of 8.2% in eight wells in this field. During the first quarter of 2006, GEM has participated in two additional workovers in the field. As a result of these activities, gross field production increased from 20 million cubic feet equivalent to approximately 28 million cubic feet equivalent of natural gas per day. A ninth well, with first production in late March 2006, has experienced some increased water and is currently shut-in for a workover scheduled for May 2006. GEM holds an approximately 39% operated working interest in this ninth well.
Main Pass, Plaquemines Parish - Louisiana
Production has been increased to approximately 475 gross barrels of oil per day ("bopd"). GEM has a 90% interest in Main Pass and is the field operator. During the third quarter of 2005, GEM completed a major overhaul and rebuild of an additional compressor for the field. Repair work on a second rental compressor damaged by the hurricane is now completed. Now that both compressors are operational, GEM plans to add additional wells to the gas lift cycle. Gross production for the field is expected to reach approximately 500 bopd after additional wells are gas lifted. GEM continues its geological and geophysical study in the area, utilizing its license to 21 square miles of 3D seismic data, covering the area held by production leases.
Raymondville Field, Willacy and Kenedy Counties - Texas
During the first quarter of 2006, GEM participated in additional recompletions that resulted in a temporary increase in gross production for the field. As previously disclosed, it is expected that field production will resume its decline rate. Currently gross production for this field is approximately 8 million cubic feet equivalent of natural gas per day. GEM has an average 27% non-operated working interest in this field.
Lake Raccourci Field, Lafourche Parish - Louisiana
GEM holds a 40% operated working interest in each of its Lake Raccourci wells. Gross production for this field is approximately 2.8 million cubic feet equivalent of natural gas per day. The State Lease 14589 #2 is currently shut-in, waiting on a workover rig scheduled for the second quarter of 2006. Upon completion of the workover, gross production is expected to return to about 5.0 million cubic feet equivalent of natural gas per day. GEM is presently seeking industry partners to drill a field extension well.
3D Seismic Licenses - Louisiana
GEM continues to evaluate its seismic licenses covering approximately 155 square miles of 3D seismic data in three different surveys across south Louisiana. A number of leads have developed in this continuing study. The process of cataloging and prioritizing the seismic data is ongoing.
South Beach Field, Chambers County - Texas
GEM has a non-operated working interest of 10% in this area. Gross production for this field is approximately 3.7 million cubic feet equivalent of natural gas per day.
Branville Bay Field, Plaquemines Parish - Louisiana
This non-operated property remains 100% shut-in from the hurricanes in late 2005. Repairs to the production facility are underway and production is expected to resume in the second quarter of 2006. GEM has a non-operated working interest of 12.5% in this area.
Point-a-la-Hache Field, Plaquemines Parish - Louisiana
This operated property also remains 100% shut-in. Damages to this field principally affected a leased production barge facility. Repairs to the production barge are expected to be completed in the second quarter 2006. GEM maintains a 25% operated working interest in the area.
Point-au-Fer Field, Terrebonne Parish - Louisiana
In 2005, GEM entered into a Participation Agreement and Joint Operating Agreement covering an area of mutual interest of approximately 56 square miles. In addition, during the fourth quarter of 2005, GEM participated in an acquisition of two wells with production potential, and a central facility. GEM owns a 12.5% non-operated working interest in the area. Two wells were drilled in the first quarter of 2006. The first well has been flow tested at about 2.75 million gross cubic feet equivalent of natural gas per day, and is waiting on hook-up to facilities. The second well has been logged productive and cased. A completion rig is expected in the second quarter of 2006. One workover and recompletion of an existing well is expected to commence in May 2006. A second workover is planned for the late second quarter of 2006. Several prospects have been identified in the area, and GEM expects to have additional drilling and workover activity in this area during 2006.
Allen Ranch Field, Colorado County - Texas
GEM owns an 11.25% non-operated working interest in the area. The initial well, the Hancock Gas Unit # 1, was productive in four sands and has been producing approximately 2.5 million gross cubic feet equivalent of natural gas per day. As a result of the success with the first well, the Hancock Gas Unit # 2 was drilled in October 2005 as an offset to the first well. This second well was logged as productive in the same four sands as the Hancock Gas Unit # 1 well and two deeper zones were also logged as productive. The deeper of the two zones has been fracture stimulated and produced about 5.0 million cubic feet equivalent of natural gas per day. This zone has now been shut-in to test the other productive zone in the well bore and a temporary bridge plug was set above the sand to protect the zone while additional testing continues. The second zone has been perforated and is scheduled for fracture stimulation in the second quarter 2006.
Coalbed Methane Prospects - Indiana and Ohio
In 2005, GEM entered into two significant Exploration and Development Agreements in Indiana and Ohio. Each prospect provides for an area of mutual interest of approximately 400,000 acres. During the first quarter of 2006, GEM has entered into another Exploration and Development Agreement in Ohio. This
prospect provides for an area of mutual interest of approximately 20,000 acres. In each case, the agreements provide for a phased delineation, pilot and development program with corresponding staged expenditures. Contracted third parties with a long track record in successful Coalbed Methane development are providing expert advice for these projects.
Indiana Prospect
In September 2005, after the submission of a Phase I core evaluation report by the technical consultant, GEM elected to proceed and fund pilot well drilling under Phase II of the agreement. Due to limited availability of needed equipment, GEM expects the drilling of the pilot wells to occur during the second quarter of 2006.
Ohio Cumberland Prospect
Core samples from the Ohio CBM prospect are being analyzed for gas content, gas composition and characteristics of the coal. Depending on final results, GEM may elect to schedule drilling of pilot wells on its Ohio CBM prospect area during 2006.
Ohio Triangle Prospect
Core samples are expected to be obtained on this third prospect late in the second quarter of 2006. Depending on final results of core analysis, GEM may elect to schedule drilling of pilot wells on this CBM prospect area during 2006.
GLOBAL'S OPERATIONS:
Revenues from Global are derived solely from its Colombian oil production. During the three months ended March 31, 2006, Global increased its revenues compared to the corresponding prior year period due to increased crude oil prices. Global production volumes remained steady during both periods.
In April 2006, Global signed a new exclusive Exploration and Production Concession contract for the Los Sauces area ("Los Sauces Contract") with the National Hydrocarbons Agency of the Republic of Colombia.
The Los Sauces Contract covers approximately 61,600 acres in the Central Llanos region of Colombia where Global already has three contracts, namely the Alcaravan Association contract and the Rio Verde and Los Hatos Exploration and Production Concession contracts. The Los Sauces Contract is contiguous with the northern boundary of the Rio Verde contract.
Global will own 100% of the Los Sauces Contract subject only to an initial 10.5% royalty, with the future size of the royalty to be determined by future production levels. The Los Sauces Contract, effective from March 31, 2006, has a principal term of thirty years divided into an initial six-year exploration phase and a 24-year exploitation and production phase. Under the terms of the Los Sauces Contract, Global must within twelve months reprocess approximately 200 kilometers of existing seismic, acquire and process 50 kilometers of 2D seismic, and drill one exploratory well.
Global can, at its election, proceed to phase 2, twelve months in duration, and drill one exploratory well. Phases 3 to 6, also all optional and twelve months in length, require the drilling of an exploratory well in each phase.
The Los Sauces area has been subject to prior drilling activity by an international oil company over ten years ago at which time the La Totuma #1 well was drilled with reported oil shows. Based upon the existing formation and seismic data, Global has elected to position and drill an exploratory well geologically updip from the existing La Totuma #1 well in the second half of 2006.
CAPITAL STRUCTURE
Effect of Convertible Debt and Equity Instruments on Dilution
As of March 31, 2006, on a consolidated basis, we had cash and short term investments of $40 million and working capital of $38 million (including $4 million cash held by Global). We had approximately $90 million in shareholders' equity at March 31, 2006.
At March 31, 2006, if our remaining outstanding debt, convertible preferred stock and common stock purchase warrants were exercised and/or converted, we would be required to issue the following amounts of our common stock:
Conversion / Shares of Common Exercise Stock Issuable at Instrument Price (a) March 31, 2006 Series M Preferred $ 0.59 8,389,831 Series G1 Preferred $ 12.50 12,800 Series G2 Preferred $ 3.00 33,333 Series L Warrants $ 0.67 3,182,836 Series M Warrants $ 0.57 4,385,965 Common Stock Potentially Issued Upon Conversion / Exercise 16,004,765
CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
Our consolidated condensed financial statements have been prepared in accordance with United States generally accepted accounting principles ("US GAAP") which requires us to use estimates and make assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Our estimates and assumptions are based on historical experience, industry conditions and various other factors which we believe are appropriate. Actual results could vary significantly from our estimates and assumptions as additional information becomes known. The more significant critical accounting estimates and assumptions are described below.
Asset Retirement Obligations - Our asset retirement obligations represent our best estimate of the fair value of our future abandonment costs associated with our oil and gas properties, including the costs of removal and disposition of tangible equipment, site and environmental restoration. We estimate the fair value of our retirement costs in the period in which the liability is incurred, if a reasonable estimate can be made. The determination of the fair value of an asset retirement obligation generally involves estimating the fair value of the obligation at the end of the property's useful life and then discounting it to present value using our credit adjusted, risk free rate of return. Estimating future asset removal costs is difficult and requires management to make estimates and judgments regarding the expected removal and site restoration costs, timing and present value discount rates. Valuations of the estimated useful life and the fair value of the asset retirement obligation are imprecise since the removal activities will generally occur several years in the future and asset removal technologies and costs are constantly changing, as are political, environmental and safety considerations that may ultimately impact the amount of the obligations.
Derivative Instruments - We are exposed to the risk of fluctuations in crude oil and natural gas prices. To reduce the impact of this risk in earnings and to increase the predictability of our cash flow, from time to time we enter into certain derivative contracts (primarily option floors) for a portion of our North American oil and gas production. As required by Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"), we are required to record all derivative contracts at fair value in our balance sheet. Changes in fair value are required to be recorded in income or other comprehensive income, depending on the hedging designation and the hedge effectiveness. Our estimates of fair value are based on market quotes from third parties. While the fair values of our derivatives have fluctuated significantly, our estimates of fair value have historically been consistent with the settlement amounts.
Fair value of our debt and equity transactions -Many of our various debt and equity transactions require us to determine the fair value of a debt or equity instrument in order to properly record the transaction in our financial statements. We historically have utilized independent third parties to assist us in determining the fair value of many of our transactions. Fair value is generally determined by applying widely acceptable valuation models, (e.g., the Black-Scholes valuation model) using the trading price of the underlying instrument or by comparison to instruments with comparable maturities and terms.
Consolidation of variable interest entities - In January 2003, the FASB issued FASB Interpretation No. ("FIN") 46, "Consolidation of Variable Interest Entities" ("FIN 46"), which requires the primary beneficiary of a variable interest entity's ("VIE") activities to consolidate the VIE. FIN 46 defines a VIE as an entity in which the equity investors do not have substantive voting rights and there is not sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. The primary beneficiary is the party that absorbs a majority of the expected losses and/or receives a majority of the expected residual returns of the VIE's activities. In December 2003, the FASB issued FIN 46(R), which supercedes and amends certain provisions of FIN 46. While FIN 46(R) retained many of the concepts and provisions of FIN 46, it also provides additional guidance related to the application of FIN 46, provides for certain additional scope exceptions, and incorporates several FASB Staff Positions issued related to the application of FIN 46. As of March 31, 2006, Harken owned less than a majority of the common shares of Global but did possess the legal power to direct the operating policies and procedures of Global through our direct ownership, combined with the 20% ownership by Lyford in Global shares. In addition, Harken has concluded that Global was not a VIE at March 31, 2006 as contemplated by FIN 46(R). During the three months ended March 31, 2006, we had an investment in a VIE named IBA, which we consolidated in accordance with FIN 46(R). See Note 3 - "Investment in International Business Associates, Ltd." in the notes to the Consolidated Condensed Financial Statements for information regarding the consolidation of IBA.
STOCK-BASED COMPENSATION
Adoption of Statement of Financial Accounting Standard No. 123 (As Amended)
Effective January 1, 2006, Harken and its consolidated companies adopted SFAS No. 123 (as amended) "Accounting for Share-Based Compensation" ("SFAS 123(R)") using the modified prospective transition method. In addition, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 107 "Share-Based Payment" ("SAB 107") in March, 2005, which provides supplemental SFAS 123(R) application guidance based on the views of the SEC. Under the modified prospective transition method, compensation cost recognized in the quarterly period ended March 31, 2006 includes: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, and (b) compensation cost for all share-based payments granted beginning January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123(R). In accordance with the modified prospective transition method, results for prior periods have not been restated.
The adoption of SFAS 123(R) resulted in an adjustment for cumulative effect in change in accounting principles on the consolidated condensed statement of operations ended March 31, 2006 for the amount of $868 thousand. This adjustment was recorded as a decrease to Net Income. The Company did not recognize a tax benefit from the cumulative effect adjustment because Global, the only entity impacted by SFAS 123 (R), currently has net operating losses that will prevent any tax benefit being received from any exercised options. In accordance with SFAS 123(R) the company will not recognize the tax benefits and/or credits to additional paid in capital for any additional deduction until the deduction actually reduces the taxes payable.
RECENT ACCOUNTING PRONOUNCEMENTS
On February 16, 2006, the FASB issued Statement 155, "Accounting for Certain Hybrid Instruments- an amendment of FASB Statements No. 133 and 140." The statement amends Statement 133 to permit fair value measurement for certain hybrid financial instruments that contain an embedded derivative, provides additional guidance on the applicability of Statement 133 and 140 to certain financial instruments and subordinated concentrations of credit risk. The new standard is effective for the first fiscal year that ends after September 15, 2006. Harken is currently evaluating the impact this new Standard will have on the Company.
RESULTS OF OPERATIONS
For the purposes of discussion and analysis, we present a summary of our consolidated condensed results of operations followed by a more detailed discussion and analysis of our segments.
Consolidated Condensed Statement of Operations Comparisons Net loss and per-share amounts for each of the periods ended March 31, 2005 and 2006, were as follows: Three Months Ended March 31, (Thousands of dollars, except per-share amounts) 2005 2006 (unaudited) Net loss $ (6,216 ) $ (1,770 ) Net loss attributed to common stock $ (6,610 ) $ (2,974 ) Net loss per share - Basic $ (0.03 ) $ (0.01 ) Diluted $ (0.03 ) $ (0.01 )
The primary components of our net loss for the period ended March 31, 2005 compared to the net loss for the period ended March 31, 2006 are outlined in the table below:
Favorable (Unfavorable) . . .
May 09, 2006
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TGB new 52 week high at $4.20 today.
52 week high today reached at $4.20
Not likin this lack of volume. Scares me aware.
HEC has lots of Volume.
Earnings due tomorrow!!! Boyahhhh!!!
Lovin my BIGN too!!!
Any guesses on a Friday Close?
If this goes to .66 I will build a position of 50,000 shares.
If this goes to 1.20 I will smile and way. Smile and wave boys!!!
My add at .77 wise decision:)
Bought QEE today.Wish it were still.41 :)
Watch HEC. Earnings out tomorrow!!!!