BPZ Resources, Inc. - Shareholder.com

Loss per Common Share
In accordance with provisions of ASC Topic 260, “Earnings per Share”, previously known as SFAS No. 128, “Earnings per
Share”, basic earnings per share is computed on the basis of the weighted-average number of common shares outstanding during the
periods. Diluted earnings per share is computed based upon the weighted-average number of common shares outstanding plus the
assumed issuance of common shares for all potentially dilutive securities. Diluted earnings per share equals basic earnings per share
for the periods presented because the effects of potentially dilutive securities are antidilutive.
Recent Accounting Pronouncements
In January 2010, the FASB issued Accounting Standards Update 2010-03, “Oil and Gas Reserve Estimation and Disclosures”
(“ASU 2010-3”), to provide consistency with the December 2008 SEC rules regarding Oil and Gas Disclosures. ASU 2010-3 amends
existing FASB standards to align the reserves calculation and disclosure requirements under U.S. GAAP with the requirements in the
SEC rules. The Company adopted the new standards effective December 31, 2009. The new standards are applied prospectively as a
change in estimate. See Supplemental Oil and Gas Information (Unaudited) for further information.
In January 2010, the Company partially adopted the provisions of FASB ASU No. 2010-06, “Improving Disclosures about
Fair Value Measurements,” which amends ASC Topic 820 to require new disclosures concerning (1) transfers into and out of Levels 1
and 2 of the fair value measurement hierarchy, and (2) activity in Level 3 measurements. In addition, ASU No. 2010-06 clarifies
certain existing disclosure requirements regarding the level of disaggregation and inputs and valuation techniques and makes
conforming amendments to the guidance on employers’ disclosures about postretirement benefit plans assets. The requirements to
disclose separately purchases, sales, issuances, and settlements in the Level 3 reconciliation are effective for fiscal years beginning
after December 15, 2010 (and for interim periods within such years). The Company will apply the disclosure requirements relative to
the Level 3 reconciliation in the first quarter of 2011. There was no impact on the Company’s financial position, results of operations
or cash flows as a result of the partial adoption of ASU No. 2010-06. For further information, please see Note-11, “Fair Value
Measurements and Disclosures”.
Note 2 — Value Added Tax Receivable
Value-added tax (referred to as “IGV” in Peru) is generally imposed on goods and services at a rate of 19%.
Peru currently has an IGV early recovery program for oil and gas companies during the exploration phase. Under this
program, IGV paid on the acquisition of certain goods and services used directly in hydrocarbon exploration activities can be
recovered prior to a commercial discovery taking place or the initiation of production and revenue billings. Because the Company has
oil sales in the Corvina field in commercial production and Albacora field under a well testing program, it is no longer eligible for the
IGV early recovery program. Accordingly, the Company is recovering its IGV receivable with IGV payables associated with future oil
sales under the normal IGV recovery process.
The Company’s current portion of value-added tax receivable as of December 31, 2010 and December 31, 2009 was $28.4
million and $26.2 million, respectively. For the year ended December 31, 2010, the Company accrued approximately $37.5 million for
IGV related to expenditures reduced by approximately $32.4 million for IGV related to the sale of oil for the same period. In addition,
the Company has approximately $3.0 million of value-added tax receivable as a long-term asset. See Note-4, “Prepaid and Other
Current Assets and Other Non-Current Assets” for further information.
Note 3 — Inventory
Inventories consist primarily of crude oil, tubular goods, accessories and spare parts for production equipment, stated at the
lower of average cost or market. The balance of inventory at December 31, 2010 and December 31, 2009 was $19.0 million and $12.5
million, respectively.
Inventory associated with tubular goods, accessories and spare parts at December 31, 2010 and December 31, 2009 was
$16.4 million and $10.5 million, respectively.
The Company maintains crude oil inventories in storage barges until the inventory quantities are at a sufficient level that the
refinery in Talara will accept delivery. These inventories are also stated at the lower of average cost or market value. Cost is
determined on a weighted average basis based on production costs. The crude oil inventory at December 31, 2010 consisted of
approximately 49,836 barrels at an estimated cost of $2.6 million or $50.55 per barrel. The crude oil inventory at December 31, 2009
consisted of approximately 40,108 barrels at an estimated cost of $2.0 million or $50.55 per barrel.
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