Quarterly report pursuant to Section 13 or 15(d)

6. DISCONTINUED OPERATIONS AND SALE OF EMIR OIL

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6. DISCONTINUED OPERATIONS AND SALE OF EMIR OIL
 3 Months Ended
Jun. 30, 2012
Notes to Financial Statements  
DISCONTINUED OPERATIONS AND SALE OF EMIR OIL

Emir Oil LLP

 

On September 19, 2011 the Company completed the sale of all of its interests in Emir Oil LLP to a subsidiary of MIE Holdings Corporation.  In anticipation of the sale of Emir Oil all operations of Emir Oil have been reclassified as discontinued operations.

 

The sale of Emir Oil was valued at $170 million in cash, net of $10.4 million in purchase adjustments. In accordance with the Purchase Agreement, the Company has placed $36 million in cash in escrow to indemnify the buyer for losses arising from the Company’s breaches of representations and warranties, failure to perform covenants, litigation matters, compliance with (and validity of) Emir Oil’s exploration contract, transfer of certain payables, defects in ownership of certain facilities and pipelines, or violations of applicable environmental law. Defense of such claims may result in additional costs to maintain the Company’s interest in the restricted cash or to limit potential liability. In the event that claims are successful, the balance payable to the buyer may include cash amounts in excess of the $36 million escrowed, including potentially an additional $3 million up to a total of $39 million under certain conditions. Accordingly, at June 30, 2012, the Company has classified the $36 million held in escrow as restricted cash, as a current asset.

 

The components of discontinued operations for three months ended June 30, 2012 and 2011 were as follows:

 

    Three months ended
    June 30, 2012     June 30, 2011
           
Revenue $                    -   $   25,022,348
           
Operating expenses   -     16,422,971
Other (income)/expense   -     54,688
           
Discontinued operations $                    -   $   8,654,065