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BPZ Energy Provides Fourth Quarter And Year Ended December 31, 2010 Financials And Operations Update

Stocks in this article: BPZ

For the year ended December 31, 2010, depreciation, depletion and amortization expense increased $8.0 million to $33.8 million from $25.8 million for the same period in 2009 and approximately 75% of depletion expense came from oil sold from the Corvina field and approximately 25% came from oil sold from the Albacora field. During the same period in 2009, all of the depletion expense came from oil sales originating from the Corvina field.

Standby Costs

As a result of suspending drilling operations in Albacora, until the Company completes our seismic data acquisition program on Block Z-1, and the demobilization and refurbishment of the drilling rig used at Corvina, which is still under contract, the Company incurred and is reporting $7.5 million in standby costs during the fourth quarter 2010. These include $4.9 million of standby rig costs, $0.8 million of standby vessel expenses, $1.2 million of salary and salary related expenses associated with drilling operations, and $0.6 million of fuel and other expenses. There were no similar expenses incurred in 2009.

Other Expense

The year ended December 31, 2010, includes $12.9 million of non-recurring charges as "Other expense" which the Company reported in the third quarter 2010. These charges include $10.7 million of charges related to certain engineering, consulting, environmental and legal costs for its planned gas plant, pipeline and gas-to-power project and $2.2 million of charges related to the abandonment of two platforms. There were no similar expenses for the same period in 2009.

Other Income and (Expense)

For the three months ended December 31, 2010, other expense was $2.9 million as compared to other income of $1.1 million in the same period in 2009. The main component of this category is interest expense.

For the three months ended December 31, 2010, the Company recognized approximately $3.1 million of net interest expense which includes $5.8 million of interest expense reduced by $2.7 million of capitalized interest expense.  For the same period in 2009, the Company did not recognize any interest expense as it capitalized all interest expense of $1.1 million to construction in progress.  For the three months ended December 31, 2010, the increase in interest expense is due to the $170.9 million of 2015 Convertible Notes issued in 2010. 

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