PINX:GLFE Gulf United Energy, Inc. Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2012
 
OR

¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from __________________to ____________________

Commission File Number 000-52322

GULF UNITED ENERGY, INC.
(Exact name of registrant as specified in its charter)


Nevada
(State or other jurisdiction of incorporation or organization)
P.O. Box 22165
Houston, Texas
(Address of principal executive offices)
20-5893642
 (I.R.S. Employer Identification No.)
 
77227-2165  
(Zip Code)
 
Registrant’s telephone number, including area code:
(713) 942-6575

Former fiscal year August 31
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ   No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ  No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨
     
Accelerated filer ¨
Non-accelerated filer ¨
     
Smaller reporting company þ
(Do not check if a smaller reporting company)
       

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ¨ No þ

As of October 10, 2012, there were 551,517,726 shares of the registrant’s common stock, par value $0.001 per share, issued and outstanding.
 
 

 
GULF UNITED ENERGY, INC. AND SUBSIDIARIES
(A Development Stage Company)

TABLE OF CONTENTS

 
 
Part I. Financial Information
   
         
Item 1
 
Financial Statements
   
         
   
Consolidated Balance Sheets (unaudited) - June 30, 2012 and December 31, 2011
 
5
         
   
Consolidated Statements of Operations and Comprehensive Loss (unaudited) - For the Three and Six  Months Ended June 30, 2012 and 2011 and the Period From Inception (September 19, 2003) through June 30, 2012
 
6
         
   
Consolidated Statements of Cash Flows (unaudited) - For the Six Months Ended June 30, 2012 and 2011 and the Period from Inception (September 19, 2003) through June 30, 2012
 
7
         
   
Consolidated Statements of Changes in Stockholders' Equity (Deficiency) and Comprehensive Loss (unaudited) for the Period from Inception (September 19, 2003) through June 30, 2012
8
         
   
Notes to the Consolidated Financial Statements (unaudited)
 
11
         
Item 2
 
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
24
         
Item 3
 
Quantitative and Qualitative Disclosures About Market Risk
 
29
         
Item 4
 
Controls and Procedures
 
29
         
   
Part II. Other Information
   
         
Item 1
 
Legal Proceedings
 
30
         
Item 1A
 
Risk Factors
 
30
         
Item 2
 
Unregistered Sales of Equity Securities and Use of Proceeds
 
30
         
Item 3
 
Defaults Upon Senior Securities
 
30
         
Item 4
 
Mining Safety Disclosures
 
30
         
Item 5
 
Other Information
 
31
         
Item 6
 
Exhibits
 
31
         
   
Signatures
 
32
         
   
EX-31.1 (EXHIBIT 31.1)
 
 
         
   
EX-31.2 (EXHIBIT 31.2)
 
 
         
   
EX-32.1 (EXHIBIT 32.1)
 
 
         
   
EX-32.2 (EXHIBIT 32.2)
   
         
 
 
 
 

 

Statement Regarding Forward-Looking Information

This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical facts included in this Report including, without limitation, statements in the Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Report, regarding our financial condition, estimated working capital, business strategy, the plans and objectives of our management for future operations and those statements preceded by, followed by or that otherwise include the words “believe”, “expects”, “anticipates”, “intends”, “estimates”, “projects”, “target”, “goal”, “plans”, “objective”, “should”, or similar expressions or variations on such expressions are forward-looking statements. We can give no assurances that the assumptions upon which the forward-looking statements are based will prove to be correct. Because forward-looking statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from the forward-looking statements including, but not limited to, our ability to identify and exploit available corporate acquisition, farm-in and/or joint venture opportunities in the energy sector in Colombia and Peru and, more generally, in Latin America, our ability to establish technical and managerial infrastructure, our ability to raise required capital on acceptable terms and conditions, our ability to take advantage of, and successfully participate in such opportunities, our ability to successfully operate, or influence our joint venture partners’ operation of, the projects in which we participate in a cost effective and efficient way; future economic conditions, political and regulatory stability and changes and volatility in energy prices.  A description of some of the risks and uncertainties that could cause our actual results to differ materially from those described by the forward-looking statements in this Quarterly Report on Form 10-Q appears in the section captioned “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on November 29, 2011 and Item 1A of this Quarterly Report on Form 10-Q.
 
Except as otherwise required by the federal securities laws, we disclaim any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained in this Quarterly Report on Form 10-Q to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
GULF UNITED ENERGY, INC. AND SUBSIDIARIES
(A Development Stage Company)

PART 1 – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

QUARTERLY REPORT
FINANCIAL STATEMENTS

June 30, 2012
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4

 
GULF UNITED ENERGY, INC. AND SUBSIDIARIES
(A Development Stage Company)

Consolidated Balance Sheets
 
   
June 30,
   
December 31,
 
   
2012
   
2011
 
   
(Unaudited)
   
(Unaudited)
 
ASSETS
           
Current Assets
           
       Cash
  $ 1,736,264     $ 2,202,699  
       Prepaid expenses
    210,226       48,750  
Total Current Assets
    1,946,490       2,251,449  
                 
       Fixed Assets:
               
       Computer Equipment
    25,391       25,391  
       Software License
    62,563       62,563  
       Less:  Accumulated Depreciation
    (58,117 )     (44,007 )
Net Fixed Assets
    29,837       43,947  
                 
Other Assets
               
       Investments in oil and gas properties (Notes 3 and 8)
    17,976,060       22,768,465  
Total Other Assets
    17,976,060       22,768,465  
                 
Total Assets
  $ 19,952,387     $ 25,063,861  
                 
LIABILITIES
               
Current
               
         Accounts payable and accrued liabilities
  $ 256,254     $ 371,868  
         Accounts payable to operators of working interests
    -       1,011,084  
         Loans payable related parties (Note 6)
    26,574       26,574  
Total Current Liabilities
    282,828       1,409,526  
                 
Total Liabilities
    282,828       1,409,526  
STOCKHOLDERS' EQUITY
               
Preferred Stock, 50,000,000 shares authorized, none issued or outstanding
    -       -  
Common Stock
               
         Authorized:
               
            700,000,000 shares with a par value of $0.001
               
         Issued and Outstanding:
               
           551,517,726  as of June 30, 2012 and
    551,518       460,268  
           460,267,726  as of December 31, 2011
               
Additional paid-in capital
    50,605,656       43,464,689  
Accumulated other comprehensive loss
    (288 )     (1,201 )
Deficit Accumulated During The Development Stage
    (31,487,327 )     (20,269,421 )
Total Stockholders' Equity
    19,669,559       23,654,335  
                 
Total Liabilities and Stockholders' Equity
  $ 19,952,387     $ 25,063,861  

The accompanying notes are an integral part of these consolidated financial statements.
 
 
5

 
GULF UNITED ENERGY, INC. AND SUBSIDIARIES
(A Development Stage Company)

Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)

                           
Period From
 
                           
Inception
 
                           
(September 19, 2003)
 
   
Three Months Ended June 30,
   
Six Months Ended June 30,
   
Through
 
   
2012
   
2011
   
2012
   
2011
   
June 30, 2012
 
                               
Revenues
  $ -     $ -     $ -     $ -     $ -  
                                         
Cost of Sales
    -       -       -       -       -  
                                         
Gross Profit
    -       -       -       -       -  
                                         
General and administrative expenses
    1,755,804       1,798,219       2,460,287       2,856,911       9,233,398  
General and administrative expenses - related parties
    36,407       -       103,089       -       9,284,940  
                                         
Operating Loss
    (1,792,211 )     (1,798,219 )     (2,563,376 )     (2,856,911 )     (18,518,338 )
                                         
Other (Income) and Expense
                                       
Gain on settlement of debt
    -       -       -       -       (3,333 )
Interest expense
    -       225,871       -       749,210       2,027,906  
Interest expense - related parties
    220,000       -       220,000       114,423       912,826  
Impairment of oil and gas properties
    8,436,144       -       8,436,144       -       8,436,144  
Interest Income
    (1,062 )     (7,702 )     (1,614 )     (10,957 )     (21,271 )
                                         
Loss from continuing operations
    (10,447,293 )     (2,016,388 )     (11,217,906 )     (3,709,587 )     (29,870,610 )
Gain (Loss) from discontinued operations
    -       -       -       150,000       (1,616,717 )
Net Loss
  $ (10,447,293 )   $ (2,016,388 )   $ (11,217,906 )   $ (3,559,587 )   $ (31,487,327 )
                                         
Basic And Diluted Loss per share
                                       
from continuing operations
  $ (0.02 )   $ -     $ (0.02 )   $ (0.04 )   $ (0.24 )
                                         
Basic And Diluted Loss per share
                                       
from discontinued operations
  $ -       -     $ -     $ -     $ (0.01 )
                                         
Basic And Diluted Net Loss per share
  $ (0.02 )   $ -     $ (0.02 )   $ (0.03 )   $ (0.25 )
                                         
Weighted Average Shares Outstanding
    530,753,837       454,667,726       495,123,495       428,524,200       121,709,017  
                                         
Comprehensive Income (Loss)
                                       
Net Loss
  $ (10,447,293 )   $ (2,016,388 )   $ (11,217,906 )   $ (3,559,587 )   $ (31,487,327 )
Currency exchange gain (loss)
    461       (346 )     913       (346 )     (288 )
Net Comprehensive Loss
  $ (10,446,832 )   $ (2,016,734 )   $ (11,216,993 )   $ (3,559,933 )   $ (31,487,615 )

The accompanying notes are an integral part of these consolidated financial statements.
 
 
6

 
GULF UNITED ENERGY, INC. AND SUBSIDIARIES
(A Development Stage Company)

Consolidated Statements of Cash Flows
(Unaudited)
 
               
Period From
 
               
Inception
 
               
(September 19, 2003)
 
   
Six Months Ended June 30,
   
Through
 
   
2012
   
2011
   
June 30, 2012
 
Cash Flows From Operating Activities
                 
   Net loss for the period
  $ (11,217,906 )   $ (3,559,587 )   $ (31,487,327 )
 Adjustments to reconcile net loss to net cash used by
                       
   operating activities:
                       
   Depreciation expense
    14,110       11,044       58,117  
   Common stock issued for prepaid expenses/services
    36,667       -       36,667  
   Expenses/services paid by issuance of common stock
    200,000       698,300       10,241,000  
   Accrued interest added to shareholder loans
    -       -       631,444  
   Stock-based compensation
    230,969       -       447,065  
   Loan discount amortization
    -       1,278,726       1,809,023  
   Non-cash portion of interest expense
    -       -       3,333  
   Gain on settlement of debt
    -       -       (3,333 )
   Foreign currency translation loss
    913       346       (288 )
   Impairment of investment in joint venture projects
    -       -       1,951,210  
   Impairment of oil and gas properties
    8,436,144       -       8,436,144  
Change in operating assets and liabilities
                       
   Payroll taxes receivable
    -       39,153       -  
   Prepaid expenses
    (158,143 )     (26,997 )     (148,393 )
   Accounts payable and accrued liabilities
    (115,614 )     (420,297 )     81,023  
Net cash used by operating activities
    (2,572,860 )     (1,979,312 )     (7,944,315 )
Cash Flows From Investing Activities
                       
     Capital Expenditures
    -       (8,853 )     (87,954 )
     Investment in oil and gas projects
    (4,654,823 )     (6,229,720 )     (22,590,973 )
     Advances to and investment in joint venture properties
    -       -       (250,000 )
Net cash used by investing activities
    (4,654,823 )     (6,238,573 )     (22,928,927 )
                         
Cash Flows From Financing Activities
                       
     Proceeds from sale of common stock
    6,761,248       24,964,119       33,196,917  
     Proceeds of bridge financing
    -       -       3,800,000  
     Principal payment on bridge financing
    -       -       (3,800,000 )
     Increase in loans payable to related parties
    -       -       226,574  
     Principal payments on shareholder loans
    -       -       (5,539,685 )
     Shares issued for discount in shareholder notes payable
    -       (623,232 )     -  
     Payments on shareholder loans
    -       (7,338,843 )     4,725,700  
Net cash provided by financing activities
    6,761,248       17,002,044       32,609,506  
(Decrease)/Increase In Cash During The Period
    (466,435 )     8,784,159       1,736,264  
Cash, Beginning Of Period
    2,202,699       120,340       -  
                         
Cash, End Of Period
  $ 1,736,264     $ 8,904,499     $ 1,736,264  

The accompanying notes are an integral part of these consolidated financial statements.
 
 
7

 
GULF UNITED ENERGY, INC. AND SUBSIDIARIES
(A Development Stage Company)

Consolidated Statements of Changes in Stockholders’ Equity (Deficiency) and Comprehensive Loss
Period from Inception (September 19, 2003) through June 30, 2012
(Unaudited)
 
                     
DEFICIT
     
                 
ACCUMULATED
 
ACCUMULATED
     
 
COMMON SHARES
 
ADDITIONAL
 
COMMON
 
OTHER
 
DURING THE
     
     
PAR
 
PAID-IN
 
SHARES
 
COMPREHENSIVE
 
DEVELOPMENT
     
 
NUMBER
 
VALUE
 
CAPITAL
 
SUBSCRIBED
 
LOSS
 
STAGE
 
TOTAL
 
Balance, September 19,
                           
2003 (date of inception)
  -   $ -   $ -   $ -   $ -   $ -   $ -  
Capital stock issued for cash:
                                         
October 2003 at $0.001
  2,500,000     2,500     -     -     -     -     2,500  
November 2003 at $0.005
  160,000     160     640     -     -     -     800  
December 2003 at $0.005
  1,400,000     1,400     5,600     -     -     -     7,000  
June 2004 at $0.01
  1,000,000     1,000     9,000     -     -     -     10,000  
July 2004 at $0.25
  23,000     23     5,727     -     -     -     5,750  
Net loss for the period
  -     -     -     -     -     (15,880 )   (15,880 )
Balance, August 31, 2004
  5,083,000     5,083     20,967     -     -     (15,880 )   10,170  
Net loss for the year
  -     -     -     -     -     (16,578 )   (16,578 )
Balance, August 31, 2005
  5,083,000     5,083     20,967     -     -     (32,458 )   (6,408 )
November 10, 2005 Stock
                                         
Split Adjustment
  20,332,000     20,332     (20,332 )   -     -     -     -  
Net loss for the year
  -     -     -     -     -     (31,577 )   (31,577 )
Balance, August 31, 2006
  25,415,000     25,415     635                 (64,035 )   (37,985 )
Capital stock issued for investment:
                                         
  January 2007 at $0.735 per share
  185,000     185     135,790     -     -     -     135,975  
  July 2007 at $0.735 per share
  750,000     750     550,500     -     -     -     551,250  
Net loss for the year
  -     -     -     -     -     (257,804 )   (257,804 )
Balance, August 31, 2007
  26,350,000     26,350     686,925                 (321,839 )   391,436  
Net loss for the year
  -     -     -     -     -     (378,039 )   (378,039 )
Balance, August 31, 2008
  26,350,000     26,350     686,925                 (699,878 )   13,397  
Net loss for the year
  -     -     -     -     -     (1,353,766 )   (1,353,766 )
Balance, August 31, 2009
  26,350,000     26,350     686,925     -     -     (2,053,644 )   (1,340,369 )
Capital stock issued for settlement
                                         
 of name issue:
                                         
  January 2010 at $0.01 per share
  50,000     50     450     -     -     -     500  
Capital stock issued to buy
                                         
 subsidiary:
                                         
  March 2010 at $0.032 per share
  300,000     300     9,300     -     -     -     9,600  
Capital stock issued for cash:
                                         
  March 2010 at $0.01 per share
  59,750,000     59,750     527,750     -     -     -     587,500  
Capital stock issued for services:
                                         
  March 2010 at $0.01 per share
  20,750,000     20,750     186,750     -     -     -     207,500  
  April 2010 at $0.01 per share
  1,500,000     1,500     13,500     -     -     -     15,000  
Capital stock issued for oil and
                                         
 gas properties:
                                         
  March 2010 at $0.01 per share
  40,000,000     40,000     384,000     200,000     -     -     624,000  
Capital stock issued for loan
                                         
 conversion:
                                         
  March 2010 at $0.01 per share
  20,000,000     20,000     180,000     200,000     -     -     400,000  
Shareholder loan interest forgiven
  -     -     631,444     -     -     -     631,444  
Capital stock issued with short-
                                         
 term debt:
                                         
  April 2010 at $0.065 per share
  17,500,000     17,500     671,894     -     -     -     689,394  
  May 2010 at $0.065 per share
  5,000,000     5,000     191,970     -     -     -     196,970  
  June 2010 at $0.087  per share
  2,500,000     2,500     113,810     -     -     -     116,310  
  July 2010 at $0.075  per share
  3,000,000     3,000     125,571     -     -     -     128,571  
  July 2010 at $0.120  per share
  500,000     500     26,773     -     -     -     27,273  
  August 2010 at $0.120 per share
  500,000     500     26,773     -     -     -     27,273  
Capital stock issued for oil and
                                         
 gas properties:
                                         
  June 2010 at $0.01  per share
  20,000,000     20,000     180,000     (200,000 )   -     -     -  
  July 2010 at $0.052  per share
  56,000,000     56,000     2,856,000     -     -     -     2,912,000  
Capital stock issued for loan
                                         
 conversion:
                                         
  June 2010 at $0.01  per share
  20,000,000     20,000     180,000     (200,000 )   -     -     -  
Net loss for the period
  -     -     -     -     -     (2,315,199 )   (2,315,199 )
Balance, August 31, 2010
  293,700,000     293,700     6,992,910     -     -     (4,368,843 )   2,917,767  

 
8

 
GULF UNITED ENERGY, INC. AND SUBSIDIARIES
(A Development Stage Company)

Consolidated Statements of Changes in Stockholders’ Equity (Deficiency) and Comprehensive Loss
Period from Inception (September 19, 2003) through June 30, 2012
(Unaudited)
                       
DEFICIT
       
                   
ACCUMULATED
 
ACCUMULATED
       
   
COMMON SHARES
 
ADDITIONAL
 
COMMON
 
OTHER
 
DURING THE
       
       
PAR
 
PAID-IN
 
SHARES
 
COMPREHENSIVE
 
DEVELOPMENT
       
   
NUMBER
 
VALUE
 
CAPITAL
 
SUBSCRIBED
 
LOSS
 
STAGE
   
TOTAL
 
                                 
                                 
Capital stock issued for services:
                               
  September 2010 at $0.06 per share
    2,500,000     2,500     147,500     -     -     -       150,000  
  October 2010 at $0.057 per share
    1,200,000     1,200     67,200     -     -     -       68,400  
  December 2010 at $0.081 per share
    40,000,000     40,000     7,960,000     -     -     -       8,000,000  
  January 2011 at $0.063 per share
    2,700,000     2,700     167,400     (170,100 )   -     -       -  
  February 2011 at $0.15 per share
    304,000     304     60,496     -     -     -       60,800  
  March 2011 at $0.30 per share
    125,000     125     37,375     (37,500 )   -     -       -  
  March 2011 at $0.26 per share
    2,000,000     2,000     515,000     -     -     -       517,000  
  July 2011 at $0.162 per share
    -     -     -     824,600     -     -       824,600  
Capital stock issued for cash:
                                             
  December 2010 at $0.20 per share
    3,875,000     3,875     746,915     -     -     -       750,790  
  January 2011 at $0.20 per share
    9,750,000     9,750     1,878,553     25,000     -     -       1,913,303  
  February 2011 at $0.30 per share
    83,388,726     83,389     23,074,637     -     -     -       23,158,026  
  March 2011 at $0.020 per share
    125,000     125     24,875     (25,000 )   -     -       -  
Capital stock subscribed for services:
                                             
  September 2010 at $0.063 per share
    -     -     -     170,100     -     -       170,100  
  February 2011 at $0.30 per share
    -     -     -     37,500     -     -       37,500  
Capital stock issued with short-
                                             
 term debt:
                                             
  September 2010 at $0.043 per share
    6,500,000     6,500     272,073     -     -     -       278,573  
  October 2010 at $0.047 per share
    1,000,000     1,000     45,524     -     -     -       46,524  
  October 2010 at $0.043 per share
    1,500,000     1,500     62,787     -     -     -       64,287  
  November 2010 at $0.047  per share
    1,500,000     1,500     68,286     -     -     -       69,786  
  Januuary 2011 at $0.047 per share
    1,500,000     1,500     68,286     (69,786 )   -     -       -  
  February 2011 at $0.047 per share
    1,000,000     1,000     45,524     (46,524 )   -     -       -  
  March 2011 at $0.047 per share
    1,000,000     1,000     46,752     (47,752 )   -                
Capital stock subscribed with
                                             
 short-term debt:
                                             
  November 2010 at $0.047  per share
    -     -     -     139,572     -     -       139,572  
  November 2010 at $0.049  per share
    -     -     -     24,490     -     -       24,490  
Capital stock issued for oil and
                                             
 gas properties:
                                             
  November 2010 at $0.09  per share
    1,000,000     1,000     89,000     -     -     -       90,000  
Compensation expense paid by
                                             
  stock option and grant issuance
    -     -     74,772     -     -     -       74,772  
Net loss
    -     -     -     -     -     (14,573,721 )     (14,573,721 )
     Other comprehensive loss -
                                             
        Currency transalation adjustment
                            (29 )           (29 )
Total comprehensive loss
    -     -     -     -     -     -       (14,573,750 )
Balance, August 31, 2011
    454,667,726     454,668     42,445,865     824,600     (29 )   (18,942,564 )     24,782,540  


 
9

 
 

GULF UNITED ENERGY, INC. AND SUBSIDIARIES
(A Development Stage Company)

Consolidated Statements of Changes in Stockholders’ Equity (Deficiency) and Comprehensive Loss
Period from Inception (September 19, 2003) through June 30, 2012
(Unaudited)


                       
DEFICIT
     
                 
ACCUMULATED
   
ACCUMULATED
     
 
COMMON SHARES
 
ADDITIONAL
 
COMMON
 
OTHER
   
DURING THE
     
     
PAR
 
PAID-IN
 
SHARES
 
COMPREHENSIVE
   
DEVELOPMENT
     
 
NUMBER
 
VALUE
 
CAPITAL
 
SUBSCRIBED
 
LOSS
   
STAGE
 
TOTAL
 
                               
                               
Capital stock issued for services:
                             
  September 2011 at $0.162 per share
  5,100,000     5,100     819,500     (824,600 )   -       -     -  
  November 2011 at $0.117 per share
  500,000     500     58,000     -     -       -     58,500  
Compensation expense paid by
                                           
  stock option issuance
  -     -     141,324     -     -       -     141,324  
Net loss
  -     -     -     -     -       (1,326,857 )   (1,326,857 )
     Other comprehensive income -
                          -                
        Currency transalation adjustment
                          (1,172 )           (1,172 )
Total comprehensive loss
  -     -     -     -     -       -     (1,328,029 )
Balance, December 31, 2011
  460,267,726     460,268     43,464,689     -     (1,201 )     (20,269,421 )   23,654,335  
Capital stock issued for services:
                                           
  June 2012 at $0.08 per share
  500,000     500     39,500     -     -       -     40,000  
Capital stock issued for cash:
                                           
  April 2012 at $0.08 per share
  88,250,000     88,250     6,672,998     -     -       -     6,761,248  
Capital stock issued for interest expense:
                                           
  June 2012 at $0.08 per share
  2,500,000     2,500     197,500     -     -       -     200,000  
Compensation expense paid by
                                           
  stock option and grant issuance
  -     -     230,969     -     -       -     230,969  
Net loss
  -     -     -     -     -       (11,217,906 )   (11,217,906 )
     Other comprehensive income -
                                           
        Currency transalation adjustment
                          913             913  
Total comprehensive loss
  -     -     -     -     -       -     (11,216,993 )
Balance, June 30, 2012
  551,517,726   $ 551,518   $ 50,605,656   $ -   $ (288 )   $ (31,487,327 ) $ 19,669,559  

The accompanying notes are an integral part of these consolidated financial statements.
 
 
 
10

 
GULF UNITED ENERGY, INC. AND SUBSIDIARIES
(A Development Stage Company)

Notes to the Consolidated Financial Statements
 June 30, 2012
(Unaudited)



Note 1 – Organization and Basis of Presentation

Gulf United Energy, Inc. (“Gulf United” or the “Company”), together with its 100% owned subsidiaries, is an international oil and gas exploration company concentrating on opportunities in South America. The Company currently has limited operations and is a development stage company as defined by the Financial Accounting Standards Board (FASB) Accounting Standards for Development Stage Entities.   The Company was incorporated in the State of Nevada on September 19, 2003.   As of June 30, 2012, the Company’s asset portfolio included participation in two hydrocarbon exploration blocks operated by SK Innovation Co. Ltd. (“SK Innovation” – Formerly SK Energy, Ltd.).   In August 2012, the Company acquired interests in two additional hydrocarbon blocks operated by SK Innovation.  SK Innovation is a subsidiary of SK Innovation Group, one of South Korea’s top five industrial conglomerates.  SK Innovation is Korea’s largest petroleum refiner and is currently active in 29 blocks in 16 countries.  The Company also has a participating interest in Block XXIV Peru and the Peru TEA operated by Upland Oil and Gas.

On August 30, 2012, the Company’s board of directors changed the Company’s fiscal year end from August 31st to December 31st.  This change will better align the Company’s financial reporting with its operational and budgeting cycle and with our operating partners and other industry participants.  The Company’s fiscal quarters will now end on the last day of March, June, September and December each year.

Interim Financial Statements

In the opinion of management, the accompanying consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) which are necessary to provide a fair presentation of operating results for the interim periods presented. The Company assumes that the users of the interim financial information herein have read or have access to the audited financial statements for the preceding fiscal year and that the adequacy of additional disclosures needed for a fair presentation may be determined in that context.  Certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”), have been condensed or omitted in this Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission. These consolidated financial statements should be read in connection with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended August 31, 2011, filed on November 29, 2011.  The results of operations presented for the quarter ended June 30, 2012 are not necessarily indicative of the results to be expected for the year.  Interim financial data presented herein are unaudited.

These financial statements have been prepared on a going concern basis. The Company has incurred losses since inception resulting in an accumulated deficit of $31,487,327 as of June 30, 2012, and further losses are anticipated in the development of our business raising substantial doubt about the Company’s ability to continue as a going concern. Our ability to continue as a going concern is dependent upon the ability of the Company to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due.  The Company raised substantial equity and debt during the year ended August 31, 2011 and during the current year.  Notwithstanding, we do not have any credit facilities available with financial institutions, stockholders or third party investors, and will continue to rely on best efforts debt and equity financings.  There is no assurance that we can raise additional debt or equity capital from external sources.  The Company has no control over the amount of funds that it may receive in financings and the time frame in which they may be received. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
 
 
 
 
 
 
 
11

 

GULF UNITED ENERGY, INC. AND SUBSIDIARIES
(A Development Stage Company)

Notes to the Consolidated Financial Statements
June 30, 2012
(Unaudited)


Note 2 – Summary of Significant Accounting Policies

Basis of Accounting
 
The Company maintains its accounts on the accrual method of accounting in accordance GAAP. The accompanying consolidated financial statements of the Company have been prepared in accordance with GAAP and the rules of the Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments necessary for a fair presentation of consolidated financial position and the results of operations have been reflected herein.

Concentration of Credit Risk
 
Financial instruments which potentially subject the Company to concentration of credit risk at this time consist principally of cash.  The Company places its cash with high credit quality financial institutions.  At times, such amounts may exceed FDIC limits; however, these deposits typically may be redeemed upon demand and therefore bear minimal risk.  In monitoring this credit risk, the Company periodically evaluates the stability of the financial institutions.

Use of Estimates
 
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.  Certain of our more critical accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. These judgments are based on our historical experience, terms of existing contracts, and our observance of trends in the industry and information available from other outside sources, as appropriate. Different, reasonable estimates could have been used in the current period.  Additionally, changes in accounting estimates are reasonably likely to occur from period to period. These, and other, factors could have a material impact on the presentation of our financial condition, changes in financial condition or results of operations.

Cash
 
Cash includes cash in a demand deposit account and a money market account with a Houston bank.  In addition, the Company has established a cash account in Bogota, Colombia as required by local regulations.  This account is maintained in Colombian pesos.

Fair Value of Financial Instruments
 
The Company’s financial instruments consist of cash, accounts payable, accrued liabilities and debt.  It is management’s opinion that the Company is not exposed to significant interest or credit risks arising from these instruments. The fair value of these financial instruments approximates their carrying values.

The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest and discount rates that approximate prevailing market rates.  In determining fair values, there are three levels of inputs used to determine value.  Level 1 inputs are quoted prices in active markets for identical assets and liabilities.  Level 2 inputs are inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.  Level 3 inputs are unobservable inputs which include risk inherent in the asset or liability.

Software License and Fixed Assets
 
The value of the software license and other fixed assets (computer equipment) is stated at cost. Depreciation is computed using the straight-line method over the thirty six-month estimated useful life of the software and other fixed assets.
 
 
12

 
 
GULF UNITED ENERGY, INC. AND SUBSIDIARIES
(A Development Stage Company)

Notes to the Consolidated Financial Statements
June 30, 2012
(Unaudited)


Any costs associated with maintenance and upgrades will be charged to expense as incurred. When the asset is retired or otherwise disposed of, the costs and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in income for the period; significant renewals and betterments are capitalized.  Deductions are made for retirements resulting from renewals or betterments.

Impairment of Long-lived Assets

The Company evaluates impairment when events or circumstances indicate that a long-lived asset’s carrying value may not be recovered.  These events include market declines, decisions to sell an asset and adverse changes in the legal or business environment.  If events or circumstances indicate that a long-lived asset’s carrying value may not be recoverable, the Company estimates the future undiscounted cash flows from the asset for which the lowest level of separate cash flows may be determined, to determine if the asset is impaired.  If the total undiscounted future cash flows are less than the carrying amount for the asset, the Company estimates the fair value of the asset through reference to sales data for similar assets, or by using a discounted cash flow approach.  The asset’s carrying value is then adjusted downward to the estimated fair value.  These cash flow estimates and assumptions could change significantly either positively or negatively.  In June 2012, the Company announced that a determination had been made to cease efforts to test and complete the Tamandua #1 well and to cease efforts to complete the Cachirre #1 well on the CPO-4 prospect in Colombia.  As a result of the determination to cease efforts to complete the Tamandua #1 well and Cachirre #1 well, the Company recorded an impairment charge of $8,436,144 to write off costs incurred through June 30, 2012 attributable to the drilling of the two wells on the Company’s CPO-4 block.

Inflation
 
The Company's results of operations have not been significantly affected by inflation and management does not expect inflation to have a significant effect on its operations in the foreseeable future.

Oil and gas properties
 
The Company follows the full cost method of accounting for its oil and gas properties, whereby all costs incurred in connection with the acquisition, exploration for and development of petroleum and natural gas reserves, if any, are capitalized. Such costs include costs of acquisition, geological and geophysical activities, rentals on non-producing leases, drilling, completing and equipping of oil and gas wells and administrative costs directly attributable to those activities and asset retirement costs. Disposition of oil and gas properties will be accounted for as a reduction of capitalized costs, with no gain or loss recognized unless such adjustment would significantly alter the relationship between capital costs and proved reserves, if any, of oil and gas, in which case the gain or loss will be recognized in the consolidated statements of operations.

As of June 30, 2012, the Company had oil and gas property investments in the amount of $17,976,060 that are excluded from depletion because reserves have not been proven to be associated with those properties.  If any proved reserves are found and when its quantity can be estimated, costs in excess of the present value of estimated future net revenues will be charged to impairment expense. The Company will apply the full cost ceiling test on a quarterly basis on the date of the latest consolidated balance sheet presented. It is not known at this time if any recoverable reserves of oil and gas exist.

In June 2012, the Company announced that a determination had been made to cease efforts to test and complete the Tamandua #1 well and to cease efforts to complete the Cachirre #1 well on the CPO-4 prospect in Colombia.  As a result of the determination to cease efforts to complete the Tamandua #1 well and Cachirre #1 well, the Company recorded an impairment charge of $8,436,144 to write off costs incurred through June 30, 2012 attributable to the drilling of the two wells on the Company’s CPO-4 block.

Asset retirement costs will be recognized when an asset is placed in service and will be included in the amortization base and will be amortized over proved reserves, if any, using the units of production method.  Depletion of proved oil and gas properties will be calculated on the units-of-production method based upon estimates of proved reserves, if any. Such calculations include the estimated future costs to develop proved reserves, if any. Costs of unproved properties are not included in the costs subject to depletion. These costs will also be assessed quarterly for impairment.  
 
 
13

 

 
GULF UNITED ENERGY, INC. AND SUBSIDIARIES
(A Development Stage Company)

Notes to the Consolidated Financial Statements
June 30, 2012
(Unaudited)

Asset Retirement Obligation
 
GAAP requires that an asset retirement obligation (ARO) associated with the retirement of a tangible long-lived asset be recognized as a liability in the period in which it is incurred and becomes determinable. Under this method, when liabilities for dismantlement and abandonment costs, excluding salvage values, are initially recorded, the carrying amount of the related oil and natural gas properties is increased.
 
The fair value of the ARO asset and liability is measured using expected future cash outflows discounted at the Company’s credit-adjusted risk-free interest rate. Accretion of the liability is recognized each period using the interest method of allocation, and the capitalized cost is depleted using the units of production method.  Should either the estimated life or the estimated abandonment costs of a property change materially upon the Company’s quarterly review, a new calculation is performed using the same methodology of taking the abandonment cost and inflating it forward to its abandonment date and then discounting it back to the present using the Company’s credit-adjusted, risk-free rate.
 
The carrying value of the asset retirement obligation is adjusted to the newly calculated value, with a corresponding offsetting adjustment to the asset retirement cost related to oil and gas property accounts.  At June 30, 2012, the Company had no material asset retirement obligations.

Basic Loss per Share

The Company is required to provide basic and diluted earnings (loss) per common share information.  The basic net loss per common share is computed by dividing the net loss applicable to common stockholders by the weighted average number of common shares outstanding.  Diluted net loss per common share is computed by dividing the net loss applicable to common stockholders, adjusted on an "as if converted" basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For the period ended June 30, 2012, there were no potentially dilutive securities issued, therefore, diluted net loss per common share equals basic net loss per share.  Common stock subscribed, if any, is not included in diluted earnings per share because the results would be anti-dilutive. In April 2011, the Company issued five-year warrants to purchase up to 1 million shares of common stock at an exercise price of $0.30.  In addition, in June 2011 the Company adopted the 2011 Stock Incentive Plan (the “2011 Plan”)  under which the Company may issue stock grants and stock options to Company employees, directors and consultants up to 45,000,000 shares which may not exceed 1,000,000 shares to any individual during any fiscal year.  These stock grants and stock options generally vest over a three-year period, beginning on the first anniversary from the date of each grant.  As of June 30, 2012, the Company has granted, to employees and independent directors of the Company, a total of 1,950,000 shares in restricted stock grants and stock options to purchase 3,500,000 shares at a weighted average exercise price of $0.14 per share.
 
Potential dilutive securities as of June 30, 2012 have been considered, but the potential dilutive effect of these securities is not believed to be material and would be anti-dilutive.  The Company reported net losses in the six months ended June 30, 2012 as well as a cumulative net loss; accordingly, the effects of any additional shares would be anti-dilutive.  The weighted average number of common and common equivalent shares outstanding was 495,123,495 and 428,524,200 for the six months ended June 30, 2012 and 2011, respectively.
 
Principles of Consolidation
 
The accompanying consolidated financial statements include the accounts of Gulf United Energy, Inc. and its wholly-owned subsidiaries, Gulf United Energy del Peru, Ltd., Gulf United Energy Cuenca Trujillo, Ltd. and Gulf United Energy de Colombia, Ltd. as of June 30, 2012.  All significant inter-company transactions and balances have been eliminated in the consolidation.

Accounting for Uncertain Tax Positions

GAAP provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in an entity’s financial statements.  GAAP requires an entity to recognize the financial statement impact of a tax position when it is more likely that not that the position will be sustained upon examination. The Company believes that all significant tax positions utilized by the Company will more likely than not be sustained upon examination.  As of the period ended June 30, 2012, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations are from the fiscal year 2008 forward (with limited exceptions). Tax penalties and interest, if any, would be accrued as incurred and would be classified as tax expense in the consolidated statements of operations and comprehensive loss.
 
 
14

 

GULF UNITED ENERGY, INC. AND SUBSIDIARIES
(A Development Stage Company)

Notes to the Consolidated Financial Statements
June 30, 2012
(Unaudited)




Stock-Based Compensation Arrangements

GAAP requires all share-based payments to employees, including grants of employee stock options, to be based on their fair values.  In accordance with the provisions of GAAP, share-based compensation cost is measured at the grant date, based on the calculated fair value of the award.  The Company recognizes compensation cost net of a forfeiture rate and recognizes the compensation cost for only those awards expected to vest on a straight-line basis over the requisite service period of the award, which is generally the vesting term.  The Company estimated the forfeiture rate based on its historical experience and its expectations of future forfeitures.  We currently expect no forfeitures. This stock-based compensation is recognized as general and administrative expense over the employee’s requisite service period (generally the vesting period of the equity award). We apply the fair value method in accounting for stock option grants using the Black-Scholes Method.
 
We grant restricted stock and stock options to employees and directors as incentive compensation. The restricted stock and options generally vest over three years, beginning on the first anniversary of the grant date. The vesting of these shares and options is dependent upon the continued service of the grantees with the Company. Upon the occurrence of a change in control, each outstanding share of restricted stock and stock option will immediately vest.

Stock Options
 
The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. The following summarizes the assumptions used in the option-pricing model and the method for determining the assumptions for the options issued in June and November 2011:
 
                            Method of Determining Assumptions  
Risk-free rate
   
1.67%;
0.89%
                   
U.S. treasury yield for 5-year treasury notes in effect at the award dates June 14, 2011 and November 1, 2011, respectively.
 
Expected years until exercise
   
5.00
                   
Full option term
 
Expected stock volatility
   
100%;
94%
                   
Historical Gulf United Energy, Inc. volatility at August 31, 2011 and November 1, 2011, respectively.
 
Dividend yield
   
   -
                   
Historical record and plan
 


In June 2012, the Compensation Committee of the Board of Directors awarded Mr. Connally a ten-year option to purchase up to 3 million shares of common stock at an exercise price of $0.08 per share pursuant to Mr. Connally’s employment agreement.  The Compensation Committee also awarded each Messrs. Ford, Miller, Fluker and Pomerantz ten-year options to purchase up to 1 million shares of common stock at an exercise price of $0.08 per share pursuant to their respective employment agreements.  Each of the Company’s independent directors, John N. Seitz and Thomas G. Loeffler, were also each awarded ten-year options to purchase up to 1 million shares of common stock at an exercise price of $0.08 per share. All of the options awarded described above were made under the Company’s 2011 Stock Incentive Plan, and vest equally over a period of three years beginning on the date of the grant.

 
15

 

GULF UNITED ENERGY, INC. AND SUBSIDIARIES
(A Development Stage Company)

Notes to the Consolidated Financial Statements
June 30, 2012
(Unaudited)
 

 

 

 
The following summarizes the assumptions used in the option-pricing model and the method for determining the assumptions for the options issued in June 2012:
 
                            Method of Determining Assumptions  
Risk-free rate
   
1.67%;
                   
U.S. treasury yield for 10-year treasury notes in effect at June 4, 2012.
 
Expected years until exercise
   
10.00
                   
Full option term
 
Expected stock volatility
   
109%;
 
                   
Historical Gulf United Energy, Inc. volatility at June 4, 2012.
 
Dividend yield
   
   -
                   
Historical record and plan
 

 

At June 30, 2012, total compensation cost related to non-vested options and awards granted to employees and independent directors not yet recognized is approximately $1.57 million and is expected to be recognized over a period of less than three years.

Information relating to stock options is summarized as follows:
 
     
Weighted
 
Weighted
   
 
Number of
 
Average
 
Average
   
 
Shares
 
Exercise
 
Contractual
 
Aggregate
 
Underlying
 
Price per
 
Life in
 
Intrinsic
 
Options
 
Share
 
Years
 
Value
Balance outstanding  - December 31, 2011
3,500,000
 
$
0.31
     
4.5
 
  $
-
Granted
9,000,000
   
0.08
     
10.0
   
-
Exercised
                 -
                   
Forfeited
                 -
                   
Expired
                 -
                   
Balance outstanding - June 30, 2012
      12,500,000
 
$
0.14
     
8.5
 
$
-
Currently exercisable — June 30, 2012
1,000,000
 
$
0.31
     
 
 
$
-
 
The weighted average grant-date fair value of options granted during the six months ended June 30, 2012 was $0.07 per share.
 
Restricted Stock Awards
 
At June 30, 2012, our employees and directors had been awarded 1.95 million restricted shares of our common stock that vest over the service period of up to three years. The restricted stock awards were valued based on the closing price of our common stock on the measurement date, typically the date of grant, and compensation expense is recorded on a straight-line basis over the restricted share vesting period.
 
 
16

 

GULF UNITED ENERGY, INC. AND SUBSIDIARIES
(A Development Stage Company)

Notes to the Consolidated Financial Statements
June 30, 2012
(Unaudited)


 
The following table summarizes the restricted stock awards activity during the six months ended June 30, 2012: 
 
       
Weighted
 
       
Average Grant
 
       
Date Fair
 
 
Number of
Value per
 
 
Shares
Share
 
Balance outstanding — December 31, 2011
    1,950,000     $ 0.30  
Granted
    0       -  
Vested
    400,000       0.32  
Forfeited
    0       -  
Balance outstanding — June 30, 2012
    1,950,000     $ 0.30  
Total grant date fair value of shares vesting during the period     400,000     $ 128,000  

Non-cash stock-based compensation expense was $230,969 for the six months ended June 30, 2012, and $141,324 for the year ended December 31, 2011.

Recently Issued Accounting Pronouncements
 
In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS (ASU 2011-04), which amends ASC 820, Fair Value Measurement. ASU 2011-04 does not extend the use of fair value accounting, but provides guidance on how it should be applied where its use is already required or permitted by other standards within U.S. GAAP or International Financial Reporting Standards (IFRS).
 
ASU 2011-04 changes the wording used to describe many requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. Additionally, ASU 2011-04 clarifies the FASB’s intent about the application of existing fair value measurements. ASU 2011-04 is effective for interim and annual periods beginning after December 15, 2011 and is applied prospectively.  The Company does not believe the adoption of this change will have any material impact on the consolidated financial statements.
 
In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220)-Presentation of Comprehensive Income.  ASU 2011-05 requires that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income.  ASU 2011-05 is effective retrospectively for fiscal years, and interim periods within those years, beginning after December 15, 2011.  Early adoption of this standard is permitted and the Company has adopted this update.

Note 3 - Investments

Investment in Joint Venture Entities - Sold

As reported in the Company’s Form 8K filed with the SEC on November 5, 2010, the Company closed on an agreement with its former joint venture partner, Cia. Mexicana de Gas Natural, S.A. de C.V., to sell all of the Company’s shares in Fermaca LNG de Cancun, S.A. de C.V. and Fermaca Gas de Cancun, S.A. de C.V. for a total amount of $1,000,000 of which $50,000 was paid upon entry into the sale agreement, $150,000 of which was paid at the close of the transaction, $120,000 of the next $150,000 was paid as of February 28, 2011 with the remaining $30,000 paid in March, 2011.   Because the Company is no longer involved in any downstream oil and gas activities, and because the Company has no further involvement in the joint ventures, the amounts related to the joint ventures have been reclassified to discontinued operations in accordance with GAAP. The next installment of $150,000 was due on May 1, 2011 and the following $150,000 installments were due on August 1, 2011 and November 1, 2011.  The final payment of $200,000 was due February 1, 2012.  As of the date of this report, none of these installments have been paid.
 
 
17

 

GULF UNITED ENERGY, INC. AND SUBSIDIARIES
(A Development Stage Company)

Notes to the Consolidated Financial Statements
June 30, 2012
(Unaudited)


No interest accrues on the installments; however, the contract provides for 7% interest to be paid on late payments.  Management is currently negotiating an extended repayment schedule; however, there is no certainty that all or any of the installments will be paid.  We have recognized payments as gain on the sale of the joint venture investment as the sales proceeds are received.  Because the sale of the joint venture interests ended the Company’s investments in pipeline and LNG infrastructure, the gain from the sale and the impairment losses have been reclassified to discontinued operations.  As of June 30, 2012, the unrecorded present value of the $650,000 in installments receivable cannot be determined because the timing of the payments, if any, is uncertain.

Colombia CPO-4

In July 2010, the Company acquired from SK Innovation, subject to regulatory approval, an undivided twelve and one-half percent (12.5%) participating interest in the CPO-4 block located in the Llanos Basin of Colombia.  Block CPO-4 consists of 345,592 gross acres (43,200 net) and is located approximately 70 miles southeast of Bogotá.  This block is operated by SK Innovation.  Approximately 530 square kilometers of 3-D seismic data has been acquired and interpreted in the northern portion of the acreage. Interpretation and study of this seismic data is ongoing.