Summary of Significant Accounting Policies | Note 3 – Summary of Significant Accounting Policies Principles of Consolidation The consolidated condensed financial statements include the accounts of all wholly-owned and majority-owned subsidiaries. All intercompany profits, transactions and balances have been eliminated. Third-party interests in our majority-owned subsidiaries are presented as noncontrolling interests owners. Reclassifications Certain reclassifications have been made to prior period amounts to conform to the current period presentation. These reclassifications did not affect our consolidated condensed financial results. Note Receivable A loan is considered impaired if it is probable, based on current information and events, that the Company will be unable to collect all amounts due according to the contractual terms of the loan. Loans are reviewed for impairment and include loans that are past due, non-performing or in bankruptcy. Recognition of interest income is suspended and the loan is placed on non-accrual status when management determines that collection of future interest income is not probable. Accrual is resumed, and previously suspended interest income is recognized, when the loan becomes contractually current and/or collection doubts are removed. Cash receipts on impaired loans are recorded first against the receivable and then to any unrecognized interest income. Investment in Affiliate Until the October 7, 2016 sale of our interests in Venezuela, we accounted for the investment in Petrodelta under Accounting Standards Codification (“ASC”) 325 – Investments – Other (the “cost method”). Under the cost method we did not recognize any equity in earnings from the investment in Petrodelta in our results of operations, but would have recognized any cash dividends in the period they were received. As of December 31, 2015, we fully impaired the carrying value of the investment in Petrodelta and effective with the October 7, 2016 closing of the CT Energy transaction, we no longer have an ownership interest in Petrodelta. See Note 1 – Organization and Note 5 – Investment in Affiliate for further information. Use of Estimates 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 reporting period. Other important significant estimates are those included in the valuation of our assets and liabilities that are recorded at fair value on a recurring and non-recurring basis. Actual results could differ from those estimates. Oil and Natural Gas Properties The major components of property and equipment are as follows: As of September 30, As of December 31, 2016 2015 (in thousands) Unproved property costs - Dussafu PSC $ 28,072 $ 28,000 Oilfield inventories 1,554 3,006 Other administrative property 2,192 1,922 Total property and equipment 31,818 32,928 Accumulated depreciation (1,521) (1,483) Total property and equipment, net $ 30,297 $ 31,445 Other Administrative Property Furniture, fixtures and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives, which range from three to five years. Leasehold improvements are recorded at cost and amortized using the straight-line method over the life of the applicable lease. For the three and nine months ended September 30, 2016 , depreciation expense from continuing operations was $ 11 thousand and $41 thousand, respectively. For the three and nine months ended September 30, 2015 , depreciation expense from continuing operations was $ 21 thousand and $67 thousand, respectively. Other Assets Other assets at September 30, 2016 and December 31, 2015 include deposits and retainers. During 2015 we fully reserved the $1.1 million blocked payment related to our drilling operations in Gabon. The payment was blocked in accordance with the U.S. sanctions against Libya as set forth in Executive Order 13566 of February 25, 2011, and administered by the United States Treasury Department’s Office of Foreign Assets Control (“OFAC”). See Note 10 – Commitments and Contingencies . At December 31, 2015, we recorded an allowance for doubtful accounts of $0.7 million and the remaining balance of the blocked payment was reclassified to a receivable from our joint venture partner for $0.4 million. Capitalized Interest We capitalize interest costs for qualifying oil and natural gas properties. The capitalization period begins when expenditures are incurred on qualified properties, activities begin which are necessary to prepare the property for production and interest costs have been incurred. The capitalization period continues as long as these events occur. The average additions for the period are used in the interest capitalization calculation. During the three and nine months ended September 30, 2016 and 2015, we did not capitalize interest costs due to insufficient on-going activity related to our oil and natural gas activities. Fair Value Measurements We measure and disclose our fair values in accordance with the provisions of ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”). ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price) and establishes a three-level hierarchy, which encourages an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of the hierarchy are defined as follows: · Level 1 – Inputs to the valuation techniques that are quoted prices in active markets for identical assets or liabilities. · Level 2 – Inputs to the valuation techniques that are other than quoted prices but are observable for the assets or liabilities, either directly or indirectly. · Level 3 – Inputs to the valuation techniques that are unobservable for the assets or liabilities. Financial instruments, which potentially subject us to concentrations of credit risk, are primarily cash and cash equivalents, accounts receivable, stock appreciation rights (“SARs”), restricted stock units (“RSUs”), debt, embedded derivatives and warrant derivative liability. We maintain cash and cash equivalents in bank deposit accounts with commercial banks, which at times may exceed the federally insured limits. We have not experienced any losses from such investments. Concentrations of credit risk with respect to accounts receivable are limited due to the nature of our receivables. In the normal course of business, collateral is not required for financial instruments with credit risk. The estimated fair value of cash and cash equivalents and accounts receivable, prepaid costs, accounts payable and other current liabilities approximate their carrying value due to their short-term nature (Level 1). The following tables set forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value as of September 30, 2016 and December 31, 2015 . During the year ended December 31, 2015, we impaired the carrying value of our Dussafu project in Gabon by $23.2 million and our investment in affiliate by $164.7 million. See Note 5 – Investment in Affiliate and Note 7 – Gabon for more information. As of September 30, 2016 Level 1 Level 2 Level 3 Total (in thousands) Recurring Assets: Embedded derivative asset - 15% Note (a) $ — $ — $ 8,391 $ 8,391 Embedded derivative asset - Additional Draw Note (a) — — 2,170 2,170 $ — $ — $ 10,561 $ 10,561 Liabilities: SARs liability $ — $ 64 $ 286 $ 350 RSUs liability — 424 — 424 Warrant derivative liability (a) — — 14,879 14,879 $ — $ 488 $ 15,165 $ 15,653 (a) See Note 8 – Debt and Financing , Note – 9 Warrant Derivative Liability and Note 13 – Discontinued Operations As of December 31, 2015 Level 1 Level 2 Level 3 Total (in thousands) Non recurring Assets: Dussafu PSC $ — $ — $ 28,000 $ 28,000 $ — $ — $ 28,000 $ 28,000 Recurring Assets: Embedded derivative asset (a) $ — $ — $ 5,010 $ 5,010 $ — $ — $ 5,010 $ 5,010 Liabilities: SARs liability $ — $ 46 $ 50 $ 96 RSUs liability — 174 — 174 Warrant derivative liability (a) — — 5,503 5,503 $ — $ 220 $ 5,553 $ 5,773 (a) See Note 8 – Debt and Financing , Note – 9 Warrant Derivative Liability and Note 13 – Discontinued Operations As of September 30, 2016 , the fair value of our liability awards included $ 0.4 million for our SARs and $ 0.4 million for the RSUs both of which were recorded in accrued expenses. As of December 31, 2015 , the fair value of our liability awards included $ 0.1 million for our SARs which were recorded in accrued expenses and $ 0.2 million for our RSUs which were recorded in accrued expenses and other long-term liabilities. Derivative Financial Instruments As required by ASC 820, a financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. See Note 9 – Warrant Derivative Liability for a description and discussion of our warrant derivative liability as well as a description of the valuation models and inputs used to calculate the fair value. See Note 8 – Debt and Financing for a description and discussion of our embedded derivatives related to our 15% Note as well as a description of the valuation models and inputs used to calculate the fair value. All of our embedded derivatives included in our assets held for sale and warrants included in liabilities held for sale are classified as Level 3 within the fair value hierarchy. See Note 13 – Discontinued Operations for discussion of our discontinued operations. Changes in Level 3 Instruments Measured at Fair Value on a Recurring Basis The following table provides a reconciliation of financial liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3). Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 (in thousands) Financial assets - embedded derivative asset (a) : Beginning balance $ 7,144 $ 2,627 $ 5,010 $ — Additions 2,692 — 3,139 2,504 Change in fair value 725 854 2,412 977 Ending balance $ 10,561 $ 3,481 $ 10,561 $ 3,481 (a) See Note 8 – Debt and Financing and Note 13 – Discontinued Operations Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 (in thousands) Financial liabilities - embedded derivative liability: Beginning balance $ — $ 13,015 $ — $ — Additions - fair value at issuance — — — 13,449 Change in fair value — (1,873) — (2,307) Conversion of debt (11,142) (11,142) Ending balance $ — $ — $ — $ — Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 (in thousands) Financial liabilities - warrant derivative liability (a) : Beginning balance $ 16,417 $ 37,595 $ 5,503 $ — Additions — — — 40,013 Change in fair value (1,538) (9,982) 9,376 (12,400) Ending balance $ 14,879 $ 27,613 $ 14,879 $ 27,613 (a) See Note 9 – Warrant Derivative Liability and Note 13 – Discontinued Operations Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 (in thousands) Financial liabilities - stock appreciation rights Beginning balance $ 241 $ — $ 50 $ — Change in fair value 45 312 236 312 Ending balance $ 286 $ 312 $ 286 $ 312 During three and nine months ended September 30, 2016 and 2015, no transfers were made between Level 1, Level 2 and Level 3 liabilities or investments. Share-Based Compensation We use the fair value based method of accounting for share-based compensation. We utilized the Black-Scholes option pricing model to measure the fair value of stock options and SARs on their grant dates in years prior to 2015. Restricted stock and RSUs were measured at their fair values. During 2015, we issued options, SARs and RSUs with an additional market condition. To fair value these awards, we utilized a Monte Carlo simulation. The following table is a summary of compensation expense recorded in general and administrative expense in our consolidated condensed statements of operations and comprehensive income (loss) by type of awards: Three Months Ended September 30, Nine Months Ended September 30, Employee Stock-Based Compensation 2016 2015 2016 2015 (in thousands) Equity based awards: Stock options $ 372 $ 444 $ 1,485 $ 1,364 Restricted stock 5 33 73 101 RSUs 75 — 224 — Total expense related to equity based awards 452 477 1,782 1,465 Liability based awards: SARs 17 93 255 370 RSUs 42 141 388 367 Total expense related to liability based awards 59 234 643 737 Total compensation expense $ 511 $ 711 $ 2,425 $ 2,202 The assumptions summarized in the following table were used to calculate the fair value of the SARs classified as Level 3 instruments that were outstanding as of the balance sheet date: Fair Value Hierarchy As of September 30, Level 2016 Significant assumptions (or ranges): Exercise price Level 1 input $ 4.52 Threshold price Level 1 input $ 10.00 Suboptimal exercise factor Level 3 input 2.5 Term (years) Level 1 input 3.81 Volatility Level 2 input 114 % Risk-free rate Level 1 input 0.98 % Dividend yield Level 2 input 0.0 % Income Taxes Deferred income taxes reflect the net tax effects, calculated at currently enacted rates, of (a) future deductible and taxable amounts attributable to events that have been recognized on a cumulative basis in the financial statements or income tax returns, and (b) operating loss and tax credit carryforwards. A valuation allowance for deferred tax assets is recorded when it is more likely than not that the benefit from the deferred tax asset will not be realized. We classify interest related to income tax liabilities and penalties as applicable, as interest expense. We recorded no penalties during the three and nine months ended September 30, 2016 and 2015. Since December 2013, we have provided deferred income taxes on undistributed earnings of our foreign subsidiaries where we are not able to assert that such earnings were permanently reinvested, or otherwise could be repatriated in a tax free manner, as part of our ongoing business. As of December 31, 2015 and through the third quarter of 2016, the deferred tax liability provided on such earnings was zero due to the impairment of the underlying book investment in Petrodelta. The 15% Note was issued, for income tax purposes, with original issue discount (“OID”). OID generally is deductible for income tax purposes. However, if the debt instrument constitutes an “applicable high-yield discount obligation” (“AHYDO”) within the meaning of IRC Section 163(i)(1), then a portion of the OID likely would be non-deductible pursuant to IRC Section 163(e)(5). Our analysis of the 15% Note is that the note may be an AHYDO; consequently, a portion or all of the OID likely may be non-deductible for income tax purposes. The Internal Revenue Service (“IRS”) has audited the Company’s 2013 and 2014 tax years. The audit commenced in April 2016 and the IRS issued a no change report on August 16, 2016. Noncontrolling Interest Owners Changes in noncontrolling interest owners were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 (in thousands) Balance at beginning of period $ (1,695) $ 78,701 $ 447 $ 79,152 Contributions by noncontrolling interest owners 297 380 1,221 543 Net loss attributable to noncontrolling interest owners (207) (294) (3,273) (908) Balance at end of period $ (1,605) $ 78,787 $ (1,605) $ 78,787 New Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases” . It is expected to be effective for periods beginning after December 15, 2018 for public entities. Early application is permitted. Under the new provisions, all lessees will report a right-of-use asset and a liability for the obligation to make payments for all leases with the exception of those leases with a term of 12 months or less. All other leases will fall into one of two categories: (1) Financing leases, similar to capital leases, will require the recognition of an asset and liability, measured at the present value of the lease payments. Interest on the liability will be recognized separately from amortization of the asset. Principal repayments will be classified as financing outflows and payments of interest as operating outflows on the statement of cash flows. (2) Operating leases will also require the recognition of an asset and liability measured at the present value of the lease payments. A single lease cost, consisting of interest on the obligation and amortization of the asset, calculated such that the amortization of the asset will increase as the interest amount decreases resulting in a straight-line recognition of lease expense. All cash outflows will be classified as operating on the statement of cash flows. We do not believe the adoption of this guidance will have a material impact on our financial position, results of operations or cash flows. In March 2016, the FASB issued ASU No. 2016-06, “Derivatives and Hedging (Topic 815: Contingent Put and Call Options in Debt Instruments)”. This amendment addresses how an entity should assess whether contingent call (put) options that can accelerate the payment of debt instruments that are clearly and closely related to the debt hosts. This assessment is necessary to determine if the option(s) must be separately accounted for as a derivative. The ASU clarifies that an entity is required to assess the embedded call (put) options solely in accordance with the specific four-step decision sequence. This means entities are not also required to assess whether the contingency for exercising the option(s) is indexed to interest rates or credit risk. For example, when evaluating debt instruments puttable upon a change in control, the event triggering the change in control is not relevant to the assessment. Only the resulting settlement of debt is subject to the four-step decision sequence. The amendment is effective for public entities for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted. However, if an entity early adopts the amendment in an interim period, any adjustments should be reflected as of the beginning of that fiscal year. We do not believe the adoption of this guidance will have a material impact on our financial position, results of operations or cash flows. In March 2016, the FASB issued ASU No. 2016-07, “Investments — Equity Method and Joint Ventures (Topic 323)”. This amendment simplifies the accounting for equity method of investments, the amendment in the update eliminates the requirement in Topic 323 that an entity retroactively adopt the equity method of accounting if an investment qualifies for use of the equity method as a result of an increase in the level of ownership or degree of influence. The amendment requires that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt equity method of accounting as of the date the investment becomes qualified for equity method accounting. The amendment in this update is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The amendment should be applied prospectively upon the effective date to increases in the level of ownership interest or degree of influence that result in the adoption of the equity method. Earlier application is permitted. We are currently evaluating the impact of this guidance. In March 2016, the FASB issued ASU No 2016-09, “Compensation — Stock Compensation (Topic 718)”. It introduces targeted amendments intended to simplify the accounting for stock compensation. Specifically the ASU requires all excess tax benefits and tax deficiencies to be recognized as income tax expense or benefit in the income statement. The tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. An entity also should recognize excess tax benefits, and assesses the need for a valuation allowance, regardless of whether the benefit reduces taxes payable in the current period. That is, off balance sheet accounting for net operating losses stemming from excess tax benefits would no longer be required and instead such net operating losses would be recognized, net of a valuation allowance if required, through an adjustment to opening retained earnings in the period of adoption. Entities will no longer need to maintain and track an Additional Paid In Capital pool. The ASU also requires excess tax benefits to be classified along with other income tax cash flows as an operating activity in the statement of cash flows. The amendment is effective for public entities for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted. We are currently evaluating the impact of this guidance. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new guidance is related to the calculation of credit losses on financial instruments. All financial instruments not accounted for at fair value will be impacted, including our trade and partner receivables. Allowances are to be measured using a current expected credit loss model as of the reporting date which is based on historical experience, current conditions and reasonable and supportable forecasts. This is significantly different from the current model which increases the allowance when losses are probable. This change is effective for all public companies for fiscal years beginning after December 31, 2019, including interim periods within those fiscal years and will be applied with a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. We are currently evaluating the provisions of this guidance and are assessing its potential impact on our financial position, results of operations, cash flows and related disclosures. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments , or ASU 2016-15. ASU 2016-15 provides specific guidance on eight cash flow classification issues not specifically addressed by GAAP: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments; contingent consideration payments; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies; distributions from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. The amendments in ASU 2016-15 are effective for interim and annual periods beginning after December 15, 2017. ASU 2016-15 should be applied using a retrospective transition method, unless it is impracticable to do so for some of the issues. In such case, the amendments for those issues would be applied prospectively as of the earliest date practicable. Early adoption is permitted. We are currently evaluating the provisions of ASU 2016-15 but do not expect ASU 2016-15 to have a significant impact on the presentation of cash receipts and cash payments within our consolidated statements of cash flows. In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory , which eliminates the exception that prohibits the recognition of current and deferred income tax effects for intra-entity transfers of assets other than inventory until the asset has been sold to an outside party. We will be required to adopt the amendments in this ASU in the annual and interim periods beginning January 1, 2018, with early adoption permitted at the beginning of an annual reporting period for which financial statements (interim or annual) have not been issued or made available for issuance. The application of the amendments will require the use of a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. We are evaluating the standard and the impact it will have on our consolidated financial statements . |