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egistration statement with the SEC and the amended registration statement was declared effective later that month. No penalty payments were associated with the delay in obtaining the effectiveness of the registration statement. June 2009 Registered Direct Offering of Common Stock On June 30, 2009, we closed the sale of approximately 18.8 million shares of our common stock, no par value, in a registered direct offering under an effective shelf registration statement. The shares of common stock were priced at $4.66 per share resulting in net proceeds to us, after placement agent fees and other fees, of approximately $82.9 million. In connection with the registered direct offering, we entered into a placement agency agreement with Canaccord Adams Inc. as lead placement agent for the offering along with Pritchard Capital Partners, LLC, and Raymond James and Associates, Inc. In addition, Rodman & Renshaw, LLC, and Wunderlich Securities, Inc. assisted as agents in the transaction. We paid approximately $4.4 million as a 5% placement agency fee of the gross proceeds received by us in accordance with the terms of the placement agency agreement. We used the proceeds of this offering to develop our properties under our existing license contracts and other general corporate purposes consistent with our operating plans. February 2009 Private Placement of Common Stock On February 23, 2009, we closed a private placement of approximately14.3 million shares of common stock, no par value, to institutional and accredited investors pursuant to a Stock Purchase Agreement dated February 19, 2009. Additionally, in March 2009, IFC exercised its pre-emptive right to elect to participate in the private placement offering resulting in an additional 1.4 million shares of common stock which brought the total to approximately 15.7 million shares of common stock sold in the private placement offering. The common stock was priced at $3.05 per share resulting in net proceeds to us, after placement agent and financial advisory fees, of approximately $45.2 million. No warrants or dilutive securities were issued in connection with the private placement. A financial advisory fee of $0.7 million was paid to Morgan Keegan and Company, Inc. for investment services and consulting related to the offering. Additionally a private placement fee of $2.2 million was paid to Pritchard Capital Partners, LLC, for placement services related to the offering. We used the proceeds of this offering to develop our properties under our existing license contracts and other general corporate purposes consistent with our operating plans. Under the Stock Purchase Agreement, we committed to file a registration statement with the SEC and obtain the registration statement’s effectiveness within the time-frames outlined in the Stock Purchase Agreement. On April 27, 2009, we obtained effectiveness of the registration statement related to the Stock Purchase Agreement in compliance with such time-frames. Turbine Purchase Agreement, Amendment and Letter Agreement On September 26, 2008, we, through our subsidiary Empresa Electrica Nueva Esperanza S.R.L., entered into a $51.7 million contract (the “Agreement”) for the purchase of three LM6000 gas-fired packaged power units from GE Packaged Power, Inc. and GE International, Inc. Sucursal de Peru (collectively “GE”). The Agreement required an initial down payment of $5.1 million and monthly progress payments of $1.1 million per unit. In January 2009, BPZ and GE entered into an amendment of the contract. Under the terms of the amendment, both GE and BPZ agreed to a suspension period under the Agreement from and including December 15, 2008 through November 15, 2009, whereby no failure on the part of BPZ or GE to perform any obligations under the Agreement would give rise to a breach of contract or the right to terminate the contract, provided we make a $3.4 million progress payment no later than February 25, 2009 and a $3.5 million progress payment to GE no later than November 16, 2009. On February 24, 2009, we paid the first progress payment of $3.4 million. Under the terms of the Letter Agreement, GE and BPZ agreed to a variable monthly payment plan ending in December 2010 with a final $20.7 million payment due no later than five days after receiving the notice of issuance to ship. The Company received the notices to ship and made all final payments due to GE under the agreements in December 2010. $15.0 Million IFC Reserve-Based Credit Facility Through December 31, 2010, we had a $15.0 million reserve-based lending facility (“IFC Facility”) agreement (the “Loan Agreement”) with IFC through our subsidiaries BPZ E&P and BPZ Marine Peru S.R.L. as borrowers. The reserve-based lending facility had $12.5 million outstanding maturing in December 2012; however, following the $40.0 million secured debt facility we entered into in January 2011, we used a portion of the proceeds to repay the amount outstanding to IFC. Because we refinanced the obligation on a long-term basis, $5.0 million of the $12.5 million that was expected to be paid within a year as of December 31, 2010 is being classified as a long term-liability, in accordance with Accounting Standard Codification (“ASC”) Topic 470, “Debt”, as we refinanced the obligation on a long-term basis. The reserve-based lending facility had interest at an approximate rate of LIBOR plus 2.75%, equivalent to 3.21% based on the six-month LIBOR rate of 0.46% at December 31, 2010. The maximum amount available under this facility begins at $15.0 million and was to be reduced by $2.5 million beginning on December 16, 2010 and every six months thereafter during the term of the 44
Loan Agreement. The amount available under the Loan Agreement was subject to a semi-annual borrowing base determination based on the value of oil reserves. In addition, we were subject to various financial covenants calculated as of the last day of each quarter, including a life of field coverage ratio, life of loan coverage ratio, debt to equity ratio and interest coverage ratio. The IFC Facility also provided for events of default, cure periods and lender remedies customary for facilities of this type. We were in compliance with all material covenants of the Loan Agreement as of December 31, 2010. Future Market Trends and Expectations Our business depends primarily on the level of current and future oil and gas demand and prices which may impact our ability to raise capital to finance the development of our current and future oil and gas opportunities, to continue developing our gasto-power project, which anchors our gas monetizing strategy, and to maintain our commitments and obligations under our current and future license contracts. The world economies are slowly recovering from a recession which began in 2008 and extended into 2009. Growth has resumed, but is modest. There are likely to be significant long-term effects resulting from the recession and credit market crisis, including a future global economic growth rate that is slower than what was experienced in recent years. In addition, more volatility may occur before a sustainable, yet lower, growth rate is achieved. Global economic growth drives demand for energy from all sources, including fossil fuels. A lower future economic growth rate could result in decreased demand growth for our crude oil and natural gas production as well as lower commodity prices, which will reduce our cash flows from operations and our profitability. In response to the current environment, we have decided to focus on oil development in Block Z-1, specifically the Corvina and Albacora fields, for 2011, and monitor operating and general and administrative expenses in an effort to enhance shareholder value. From a production perspective, our goal is to stabilize production during 2011, assuming we encounter minimal technical difficulties and successfully operate the Corvina gas and water injection facilities. In order to attain that goal we plan to commit a majority of our 2011 capital budget of approximately $50 million on further development of the Corvina field and construction and installation of the gas and water injection facilities in the Albacora field. Expected operational cash flow from Corvina and Albacora oil sales as well as the additional proceeds from the recent debt transaction should contribute towards funding the 2011 capital expenditures budget. In addition, we will continue to evaluate our options on additional financing as needed. We anticipate future results will be based on our production levels and current and future oil prices. When forecasting our 2011 performance, we relied on assumptions about the market for oil, our customers and suppliers, past results and operational and regulatory delays. We expect the average spot price for oil in 2011 to be relatively consistent with the average price we received in 2010, though recent political activity in the Middle East has caused crude prices to exceed this amount in the short term. Our results could materially differ from what we anticipate if any of our assumptions, such as major technical or mechanical well issues, commodity pricing, production levels or our ability to raise additional capital, prove to be incorrect. In addition, our businesses’ operations, financial condition and results of operations are subject to numerous risks and uncertainties that if realized could cause our actual results to differ substantially from our forward-looking statements. These risks and uncertainties are further described in Item 1A. — “Risk Factors” of this report. 45
Page 1 and 2: BPZ 2010 ANNUAL REPORT
Page 3 and 4: Manuel Pablo Zúñiga-Pflücker Pre
Page 5 and 6: I would like to express my sincere
Page 7 and 8: Company drilled and completed at th
Page 9 and 10: UNITED STATES SECURITIES AND EXCHAN
Page 11 and 12: PART I BPZ Resources, Inc. cautions
Page 13 and 14: Our Competition Intense competition
Page 15 and 16: License contracts are subject to ro
Page 17 and 18: Although we believe our operations
Page 19 and 20: Our reserve estimates depend on man
Page 21 and 22: The debt facility matures on July 2
Page 23 and 24: • clean-up responsibilities; •
Page 25 and 26: • although we plan to enter into
Page 27 and 28: esult in the suspension of our curr
Page 29 and 30: We may not be able to replace our r
Page 31 and 32: Because we are a relatively new pub
Page 33 and 34: the existing platform located in th
Page 35 and 36: In connection with the first explor
Page 37 and 38: In addition, the Board of Directors
Page 39 and 40: Block Z-1 Seismic Acquisition Altho
Page 41 and 42: Performance Graph The following gra
Page 43 and 44: (1) In our Form 10K for the year en
Page 45 and 46: Oil Development General We will con
Page 47 and 48: The A-16D well was originally inten
Page 49 and 50: agreements; and change in control.
Page 51: We estimated our non-convertible bo
Page 55 and 56: wells and regular maintenance, the
Page 57 and 58: million of salary and salary relate
Page 59 and 60: of revenue to offset our deferred t
Page 61 and 62: Lease Operating Lease operating exp
Page 63 and 64: The income tax expense (benefit) fo
Page 65 and 66: cash of $6.4 million and in 2008 pr
Page 67 and 68: Long-Term Debt and Capital Lease Ob
Page 69 and 70: (2) prior to January 1, 2015, durin
Page 71 and 72: Other In July 2009, we, through our
Page 73 and 74: (1) Includes operating leases for o
Page 75 and 76: Revenue Recognition We recognize re
Page 77 and 78: Interest Rate Risk. As of December
Page 79 and 80: ITEM 8. FINANCIAL STATEMENTS AND SU
Page 81 and 82: To the Board of Directors and Stock
Page 83 and 84: BPZ Resources, Inc. and Subsidiarie
Page 85 and 86: BPZ Resources, Inc. and Subsidiarie
Page 87 and 88: investment under the cost method. A
Page 89 and 90: Oil and Gas Accounting Reserves Det
Page 91 and 92: Loss per Common Share In accordance
Page 93 and 94: Note 5 — Property, Equipment and
Page 95 and 96: Activity related to the Company’s
Page 97 and 98: The Company estimates the cash paym
Page 99 and 100: holders of the 2015 Convertible Not
Page 101 and 102: an amended registration statement w
Page 103 and 104:
there was $1.2 million of total unr
Page 105 and 106:
Additional Fair Value Disclosures $
Page 107 and 108:
costs related to the platform in th
Page 109 and 110:
Note 17 — Business Segment Inform
Page 111 and 112:
minority position in the project. H
Page 113 and 114:
of the subjective decisions require
Page 115 and 116:
Costs Incurred in Oil and Natural G
Page 117 and 118:
(1) Includes crude oil, condensate
Page 119 and 120:
The following table sets forth the
Page 121 and 122:
(d) Attestation Report To the Board
Page 123 and 124:
PART IV ITEM 15. EXHIBITS AND FINAN
Page 125 and 126:
Net acres or net wells. The sum of
Page 127 and 128:
INDEX OF EXHIBITS 2.1 Plan of Conve
Page 129 and 130:
Company Information Board of Direct
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