Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2013 |
Basis Of Presentation [Abstract] | ' |
Consolidation, Policy [Policy Text Block] | ' |
Principles of Consolidation |
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The consolidated financial statements include the accounts of FX Energy, Inc., and its wholly owned subsidiaries and its undivided interests in Poland. All significant intercompany accounts and transactions have been eliminated in consolidation. At December 31, 2013, we owned 100% of the voting common stock or other equity securities of our subsidiaries. |
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Cash and Cash Equivalents, Policy [Policy Text Block] | ' |
Cash and Cash Equivalents |
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We consider all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. We determine the appropriate classification of our investments in cash and cash equivalents at the time of purchase and reevaluate such designation at each balance sheet date. |
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Fair Value Of Financial Instruments and Nonfinancial Assets and Liabilities [Policy Text Block] | ' |
Fair Value of Financial Instruments and Nonfinancial Assets and Liabilities |
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The carrying amounts of our financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities, approximate fair value because of their generally short maturities. The accounting standards for fair value measurements provide for fair value measurements of all nonfinancial assets and nonfinancial liabilities not recognized or disclosed at fair value in the financial statements on a recurring basis. |
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Concentration Risk, Credit Risk, Policy [Policy Text Block] | ' |
Concentration of Credit Risk |
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The majority of our receivables are within the oil and gas industry, primarily from the purchasers of our oil and gas and fees generated from oilfield services and our industry partners. Substantially all of our Polish receivables are with PGNiG or one of its affiliates, and substantially all of our domestic receivables are with Cenex, a regional refiner and marketer. The receivables are not collateralized. To date, we have experienced minimal bad debts and have no allowance for doubtful accounts at December 31, 2013 and 2012. The majority of our cash and cash equivalents are held by four financial institutions in Utah, Montana, and Poland. |
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Inventory, Policy [Policy Text Block] | ' |
Inventory |
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Inventory consists primarily of tubular goods and production-related equipment and is valued at the lower of average cost or market. |
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Oil and Gas Properties Policy [Policy Text Block] | ' |
Oil and Gas Properties |
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We follow the successful-efforts method of accounting for our oil and gas operations. Under this method of accounting, all property acquisition costs and costs of exploratory and development wells are capitalized when incurred, pending determination of whether an individual well has found proved reserves. If it is determined that an exploratory well has not found proved reserves, if the determination that proved reserves have been found cannot be made within one year, or if we are not making sufficient progress assessing the reserves and the economic and operating viability of the project, the costs of the well are expensed. The costs of development wells are capitalized whether productive or nonproductive. Geological and geophysical costs on exploratory prospects and the costs of carrying and retaining unproved properties are expensed as incurred. An impairment charge is provided to the extent that capitalized costs of unproved properties, on a field-by-field basis, are not considered to be realizable. Depreciation, depletion, and amortization (“DD&A”) of capitalized costs of proved oil and gas properties is provided on a field-by-field basis using the units-of-production method. The computation of DD&A takes into consideration the anticipated proceeds from equipment salvage. An impairment loss is recorded if the net capitalized costs of proved oil and gas properties exceed the aggregate undiscounted future net revenues determined on a field-by-field basis. The impairment loss recognized equals the excess of net capitalized costs over the related discounted future net cash flows determined on field-by-field basis. Gains and losses are recognized on sales of entire interests in proved and unproved properties. Sales of partial interests are generally treated as a recovery of costs and any resulting gain or loss is recorded as other income. |
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Total dry hole costs (in thousands) of $6,678 in 2013 were principally related to the Mieczewo-1K and Plawce-2 wells in Poland. Dry hole costs of $12,711 in 2012 were principally related to the Kutno-2 well drilled in Poland and one Alberta Bakken well drilled in Montana. Dry hole costs of $1,328 in 2011 were principally related to the Machnatka-1 well drilled in Poland. |
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During 2013, we recorded impairments of oil and gas properties of $6.1 million. We relinquished certain concessions in Poland, impairing the remaining capitalized costs of $1.0 million. In addition, we impaired approximately $4.5 million of prior-year costs associated with our Plawce-2 well following its unsuccessful fracture stimulation, along with approximately $200,000 of prior-year costs associated with our Mieczewo-1K well. Finally, our Zaniemysl-3 well ceased production during 2013, causing us to charge its remaining net book value of $367,000 to impairment expense. |
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During 2012, we recorded impairments of oil and gas properties of $2.6 million. We relinquished certain concessions in Poland, impairing the remaining capitalized costs of $787,000. In Montana, we determined that our Alberta Bakken-related wells and leases were not prospective for hydrocarbon potential. We impaired the remaining capitalized costs of $1.8 million. The $7.0 million of impairment of oil and gas properties on the statements of cash flows includes both the $2.6 million of impairment recognized, as well as $4.4 million of exploration costs capitalized in 2011 related to the Kutno-1 dry hole, which were recognized in the third quarter of 2012. During 2011, we relinquished certain concessions in Poland and impaired the remaining capitalized costs of $72,000. |
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The following table reflects the net changes in capitalized exploratory well costs, which are capitalized pending the determination of proved reserves: |
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| | Year Ended December 31, | |
| | 2013 | | 2012 | | 2011 | |
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Beginning balance at January 1 | | $ | 11,160 | | $ | 9,965 | | $ | 3,614 | |
Additions to capitalized exploratory well costs | | | | | | | | | | |
pending the determination of proved reserves | | | 13,022 | | | 6,984 | | | 9,965 | |
Reclassifications to wells, facilities, and equipment | | | | | | | | | | |
based on the determination of proved reserves | | | — | | | — | | | -3,614 | |
Capitalized exploratory well costs charged to expense | | | -4,941 | | | -5,789 | | | — | |
Ending balance at December 31 | | $ | 19,241 | | $ | 11,160 | | $ | 9,965 | |
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The 2013 additions include costs associated with our Tuchola-3K, Tuchola-4K, and Gorka-Duchowna-1 wells in Poland. The costs associated with the Plawce-2 well were charged to expense following an unsuccessful fracture stimulation in 2013. The following table shows the capitalized costs, by well, at December 31, 2013, along with the year for which the costs of each well were incurred: |
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| | Drilling Costs | | December 31, | |
| | 2013 | | 2012 | | 2013 | |
| | (in thousands) | | | |
Well: | | | | | | | | | | |
Tuchola-4K | | $ | 290 | | $ | — | | $ | 290 | |
Tuchola-3K | | | 7,513 | | | 1,467 | | | 8,980 | |
Gorka-Duchowna-1 | | | 4,747 | | | — | | | 4,747 | |
Frankowo-1 | | | 472 | | | 4,752 | | | 5,224 | |
Total cost | | $ | 13,022 | | $ | 6,219 | | $ | 19,241 | |
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The 2012 additions include costs associated with our Mieczewo-1K, Tuchola-3K, Plawce-2, and Frankowo-1 wells in Poland. The Mieczewo-1K and Tuchola-3K wells were drilling at year-end 2012. The Plawce-2 well was drilled in 2011 and was fracture stimulated during the first half of 2013. The Frankowo-1 well is currently being evaluated for future potential. The exploratory wells costs charged to expense during 2012 included costs at our Kutno-2 well in Poland along with costs associated with all Alberta Bakken test wells drilled in Montana. The 2011 activity included costs associated with the Plawce-1 and Kutno-2 wells in Poland and our first three Alberta Bakken tests in Montana. All five wells were either in progress or being evaluated or tested at the end of 2011. |
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Property, Plant and Equipment, Policy [Policy Text Block] | ' |
Other Property and Equipment |
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Other property and equipment, including oilfield-servicing equipment, is stated at cost. Depreciation of other property and equipment is calculated using the straight-line method over the estimated useful lives (ranging from three to 40 years) of the respective assets. The costs of normal maintenance and repairs are charged to expense as incurred. Material expenditures that increase the life of an asset are capitalized and depreciated over the estimated remaining useful life of the asset. The cost of other property and equipment sold, or otherwise disposed of, and the related accumulated depreciation are removed from the accounts, and any gain or loss is reflected in current operations. |
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The historical cost of other property and equipment, presented on a gross basis with accumulated depreciation, is summarized as follows: |
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| | December 31, | | Useful Life | | |
| | 2013 | | 2012 | | (in years) | | |
| | (in thousands) | | | | |
Other property and equipment: | | | | | | | | | | |
Drilling rigs | | $ | 9,797 | | $ | 8,872 | | 6 | | |
Other vehicles | | | 414 | | | 412 | | 5 | | |
Building | | | 293 | | | 139 | | 40 | | |
Office equipment and furniture | | | 1,353 | | | 1,294 | | 3 to 6 | | |
Total cost | | | 11,857 | | | 10,717 | | | | |
Accumulated depreciation | | | -9,125 | | | -8,147 | | | | |
Net other property and equipment | | $ | 2,732 | | $ | 2,570 | | | | |
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Supplemental Disclosure Of Cash Flows Information [Policy Text Block] | ' |
Supplemental Disclosure of Cash Flows Information |
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Noncash investing and financing transactions not reflected in the consolidated statements of cash flows include the following: |
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| | Year Ended December 31, | |
| | 2013 | | 2012 | | 2011 | |
| | (in thousands) | |
Noncash investing transactions: | | | | | | | | | | |
Additions to properties included in current liabilities | | $ | 2,999 | | $ | 3,374 | | $ | 3,409 | |
Cash paid for interest: | | | | | | | | | | |
Cash paid during the year for interest | | | 2,111 | | | 1,983 | | | 1,596 | |
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Cash paid for interest in 2013, 2012, and 2011 (in thousands) includes $270, $454, and $858, respectively, in commitment and other fees on our expanded credit facility. |
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Revenue Recognition, Policy [Policy Text Block] | ' |
Revenue Recognition |
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Revenues associated with oil and gas sales are recorded when title passes, which is upon delivery to the pipeline or other purchaser, and are net of royalties and value-added taxes. Oilfield service revenues are recognized when the related service is performed. |
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Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block] | ' |
Stock-Based Compensation |
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We maintain several stock-based incentive plans. Under these plans, we may issue options or restricted stock awards. Options are granted at an option price equal to the market value of the stock at the date of grant, have a term of ten years, and vest in three equal annual installments. Restricted stock awards have similar terms and vesting requirements. Accounting standards require stock-based compensation costs to be measured at the grant date, based on the estimated fair value of the award, and recognized as expense over the employee’s requisite service period. |
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Income Tax, Policy [Policy Text Block] | ' |
Income Taxes |
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Deferred income taxes are provided for the differences between the tax bases of assets or liabilities and their reported amounts in the consolidated financial statements. Such differences may result in taxable or deductible amounts in future years when the asset or liability is recovered or settled, respectively. |
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We did not have any unrecognized tax benefits at December 31, 2013. We are subject to audit in the United States by the Internal Revenue Service and various states for the prior three years and in Poland by Polish tax authorities for the prior five years. We do not believe there will be any material changes in our unrecognized tax positions over the next 12 months. Our policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. No tax-related interest expense or penalties were recognized during the year ended December 31, 2013. |
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New Accounting Pronouncements, Policy [Policy Text Block] | ' |
New Accounting Standards |
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In December 2011, the Financial Accounting Standards Board (“FASB”) issued new standards that require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The new standards were effective for annual periods beginning on or after January 1, 2013. We evaluated the provisions of the new standards and determined that they did not have a significant effect on financial position, cash flow, or current or future earnings or operations. |
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We have reviewed all other recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on our consolidated results of operations, financial position, and cash flows. Based on that review, we believe that none of these pronouncements will have a significant effect on financial position, cash flow, or current or future earnings or operations. |
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Foreign Currency Transactions and Translations Policy [Policy Text Block] | ' |
Foreign Operations |
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The functional currency of our Polish subsidiary is the Polish zloty. The functional currency for the Polish subsidiary affects the amounts reported for Polish assets, liabilities, revenues, and expenses from those that would be reported if we used the U.S. dollar as the functional currency. The differences depend on changes in period-average and period-end exchange rates. Translation adjustments result from the process of translating the Polish subsidiary’s financial statements into the U.S. dollar reporting currency. Translation adjustments are not included in determining net income but are reported separately and accumulated in other comprehensive income. The accounting basis of the assets and liabilities of FX Energy Poland, our wholly owned subsidiary, is adjusted to reflect the difference between the exchange rate when the asset or liability was first recorded and the exchange rate on the date of the change. We record a cumulative translation adjustment (“CTA”) on our balance sheet to reflect those basis differences. At December 31, 2013 and 2012, the CTA balance was $15.0 million and $18.0 million, respectively. Because of the fluctuation in exchange rates between reporting periods and changes in certain account balances, the CTA will change from period to period. |
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During 2013, we recorded foreign currency transaction gains of approximately $5.0 million attributable to decreases in the amount of Polish zlotys necessary for FX Energy Poland to satisfy outstanding intercompany dollar-denominated loans and unpaid interest to FX Energy, Inc., as well as dollar-denominated notes payable held by FX Energy Poland. There was a corresponding debit to other comprehensive income for the gains attributable to the dollar-denominated loans, notes payable, and unpaid interest, which was then offset by translation adjustments of approximately $2.0 million related to our other balance sheet accounts as discussed above. |
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During 2013, we converted approximately $45 million of loans between FX Energy Poland and FX Energy, Inc., to equity. The conversion was necessary in order to make future interest payments from FX Energy Poland to FX Energy, Inc., tax deductible in Poland. The total amount of outstanding intercompany loans and accrued interest at December 31, 2013, was approximately $56 million and $63 million, respectively. |
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During 2012, we recorded foreign currency transaction gains of approximately $16.3 million attributable to decreases in the amount of Polish zlotys necessary for FX Energy Poland to satisfy outstanding intercompany dollar-denominated loans and unpaid interest to FX Energy, Inc., as well as dollar-denominated notes payable held by FX Energy Poland. There was a corresponding debit to other comprehensive income for the gains attributable to the dollar-denominated loans, notes payable, and unpaid interest, which was then offset by translation adjustments of approximately $5.4 million related to our other balance sheet accounts as discussed above. The total amount of outstanding intercompany loans and accrued interest at December 31, 2012, was approximately $106 million and $53 million, respectively. |
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During 2011, we recorded foreign currency transaction losses of approximately $23.5 million. We recorded a loss of approximately $23.4 million attributable to increases in the amount of Polish zlotys necessary for FX Energy Poland to satisfy outstanding intercompany dollar-denominated loans and unpaid interest to FX Energy, Inc., as well as dollar-denominated notes payable held by FX Energy Poland. There was a corresponding credit to other comprehensive income for the losses attributable to the dollar-denominated loans, notes payable, and unpaid interest, which was then offset by translation adjustments of approximately $8.6 million related to our other balance sheet accounts as discussed above. The total amount of outstanding intercompany loans and accrued interest at December 31, 2011, was approximately $111 million and $43 million, respectively. |
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The following table provides a summary of changes in CTA: |
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| | Year Ended December 31, | | | | |
| | 2013 | | 2012 | | | | |
| | (in thousands) | | | | |
Beginning balance | | $ | 18,027 | | $ | 28,964 | | | | |
Decrease related to losses (gains) | | | | | | | | | | |
on dollar-denominated loans and notes payable | | | -4,986 | | | -16,289 | | | | |
Increase related to translation adjustments | | | 1,984 | | | 5,352 | | | | |
Ending balance | | $ | 15,025 | | $ | 18,027 | | | | |
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Future transaction gains or losses may be significant given the amount of dollar-denominated intercompany loans and notes payable and the volatility of exchange rates. Future translation adjustments will also vary in concert with changes in exchange rates. These gains, losses, and adjustments are noncash items for U.S. reporting purposes and have no impact on our actual zloty-based revenues and expenditures in Poland. |
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We enter into various operating agreements in Poland denominated in the Polish zloty, which is subject to exchange-rate fluctuations. We do not use derivative financial instruments for trading or speculative purposes. |
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Use of Estimates, Policy [Policy Text Block] | ' |
Use of Estimates |
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The preparation of the consolidated financial statements in conformity with Generally Accepted Accounting Principles, or “GAAP,” requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reporting period. Certain accounting policies involve judgments and uncertainties to such an extent that there is reasonable likelihood that materially different amounts could have been reported under different conditions or if different assumptions had been used. We evaluate our estimates and assumptions on a regular basis. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and assumptions used in preparation of our financial statements. The most significant estimates regarding these financial statements relate to the provision for income taxes, including uncertain tax positions, stock-based compensation, future development and abandonment costs, estimates to certain oil and gas revenues and expenses, and estimates of proved oil and natural gas reserve quantities used to calculate depletion, depreciation, and impairment of proved oil and natural gas properties and equipment. |
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Earnings Per Share, Policy [Policy Text Block] | ' |
Net Income (Loss) per Share |
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Basic earnings per share is computed by dividing the net loss applicable to common shares by the weighted average number of common shares outstanding. Diluted earnings per share is computed by dividing the net income (loss) by the sum of the weighted average number of common shares and the effect of dilutive unexercised stock options, warrants, unvested restricted stock, and convertible preferred stock or debt. |
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Outstanding options, warrants, and unvested restricted stock as of December 31, 2013, 2012, and 2011, were as follows: |
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| | Options, Warrants, and | | | | | | | | |
| | Unvested Restricted Stock | | Price Range | | | | | |
Balance sheet date: | | | | | | | | | | |
31-Dec-13 | | 2,551,928 | | | $0.00-$5.06 | | | | | |
31-Dec-12 | | 1,930,398 | | | 0.00-5.06 | | | | | |
31-Dec-11 | | 1,356,041 | | | 0.00-10.65 | | | | | |
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The above options, warrants, and unvested restricted stock were not included in the computation of diluted earnings per share for the years presented because the effect would have been antidilutive. |
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