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 ~~September 30~~March 31, ~~2014~~2015

[_] 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 1-10262

HKN, INC.

(Exact name of registrant as specified in its charter)

Delaware

95-2841597

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

180 State Street, Suite 200

Southlake, Texas

76092

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code (817) 424-2424

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 [X] No [_]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date 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 [X] 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 [_] (Do not check if a smaller reporting company)	Smaller reporting company [X]

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

The number of shares of common stock, par value $0.01 per share, outstanding as of ~~November~~May 46, ~~2014~~2015 was 390,916.

HKN, INC.

INDEX TO QUARTERLY REPORT

~~September~~March 3031, ~~2014~~2015

			Page
PART I - FINANCIAL INFORMATION
	Item 1.	Consolidated Condensed Financial Statements
		Consolidated Condensed Balance Sheets (Unaudited)	3
		Consolidated Condensed Statements of Operations (Unaudited)	4
		Consolidated Condensed Statements of Comprehensive Income (Loss) (Unaudited)	5
		Consolidated Condensed Statements of Comprehensive Loss (Unaudited)	5
		Consolidated Condensed Statements of Cash Flows (Unaudited)	6
		Notes to Consolidated Condensed Financial Statements (Unaudited)	7
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2118
	Item 4.	Controls and Procedures	3530
PART II - OTHER INFORMATION
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3631
	Item 6.	Exhibits	3732
SIGNATURES			3833

HKN, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited, in thousands, except for share and per share amounts)

	September 30,			December 31,
	March 31,			December 31,
	2014			2013
	2015			2014
Assets
Current Assets:
Cash and cash equivalents	$	811,~~876~~062		$	14,~~302~~502
Accounts receivable		~~268~~99			~~334~~138
Assets of discontinued operations, net of allowance of $158 thousand at September 30, 2014
Prepaid expenses and other current assets		222			288
and December 31, 2013		3			6
Total Current Assets		11,383			14,928
Short term note receivable - related party, net of deferred transaction fees of $65 thousand
Oil and gas property, using the successful efforts method of accounting		2,856			2,774
at September 30, 2014		7,435			—
Arctic Star plant		6,249			611
Prepaid expenses and other current assets		339			214
Construction in progress - Arctic Star plant		—			5,736
Total Current Assets		16,921			14,856
Weathered lagoon plant		79			79
Oil and gas property, using the successful efforts method of accounting		4,395			4,450
Office equipment and other		352			356
Construction in progress - plant		14,673			8,833
Accumulated depreciation and depletion		(1,528	)		(1,304	)
Weathered lagoon plant		6,230			6,236
Total Property and Equipment, net		8,008			8,252
Capital leases - equipment		844			—
Intangible assets, net		1,410			1,462
Office equipment and other		382			305
Investment in Global		7,509			9,979
Accumulated depreciation and depletion		(1,089	)		(781	)
Other assets		287			359
Total Property and Equipment, net		25,435			19,043
Total Assets	$	28,597		$	34,980
Intangible assets, net		1,513			1,667
Long term note receivable - related party, net of deferred transaction fees of $177 thousand
at December 31, 2013		—			11,823
Investment in Global		9,450			19,312
Other assets		413			259
Total Assets	$	53,732		$	66,960
Liabilities and Stockholders' Equity
Current Liabilities:
Trade payables	$	~~390~~133		$	~~838~~329
Liabilities of discontinued operations		32,~~283~~522			~~160~~3,237
Capital lease obligation - short term		392			—
Notes payable - short term		—			48
Accrued liabilities and other		816			1,583
Capital lease obligation - short term		449			441
Preferred stock dividends		4			—
Accrued liabilities and other		308			659
Total Current Liabilities		43,~~885~~412			24,~~581~~714
Asset retirement obligation		2			2
Capital lease obligation - long term		282			—
Notes payable - long term		—			15
BWI contingency		800			800
Capital lease obligation - long term		65			163
Total Liabilities		53,~~969~~479			34,~~383~~894
Contingencies (Note 2 and 12)
Commitments and Contingencies (Note 10)
Stockholders’ Equity:
Series G1 convertible preferred stock, $1.00 par value; $100,000 liquidation value;
700,000 shares authorized; 1,000 shares outstanding		1			1
Series G2 convertible preferred stock, $1.00 par value; $100,000 liquidation value;
100,000 shares authorized; 1,000 shares outstanding		1			1
Common stock, $0.01 par value; 2,000,000 shares authorized;
390,916 and 401,943 shares issued and outstanding, respectively		4			4
390,916 shares issued and outstanding		4			4
Additional paid-in capital		449,~~706~~669			~~450~~449,~~394~~762
Accumulated deficit		(~~400~~422,~~486~~085	)		(~~395~~419,~~643~~680	)
Accumulated other comprehensive income (loss)		(1,463	)		8,820
Accumulated other comprehensive loss		(2,470	)		—
Total Stockholders' Equity		4725,~~763~~118			6330,~~577~~086
Total Liabilities and Stockholders' Equity	$	5328,~~732~~597		$	6634,~~960~~980

The accompanying Notes to Consolidated Condensed Financial Statements are

an integral part of these Statements.

HKN, INC.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except for share and per share amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,
	Three Months Ended March 31,
	2014			2013			2014			2013
	2015			2014
Revenues:
Oil and gas operations	$	~~339~~82		$	~~309~~138		$	~~794~~		$	~~823~~
Total revenues		~~339~~82			~~309~~138			~~794~~			~~823~~
Operating costs and expenses:
Oil and gas operating		5842			6036			~~170~~			~~126~~
Selling, general and administrative		821			827			2,810			2,475
Arctic Star plant operating		346			—
Depreciation, depletion and amortization		176			211			503			555
Selling, general and administrative		1,663			1,162
Total operating costs and expenses		1,055			1,098			3,483			3,156
Depreciation, depletion and amortization		280			133
Loss from operations		(716	)		(789	)		(2,689	)		(2,333	)
Total operating costs and expenses		2,331			1,331
Other income and expenses:
Loss from operations		(2,249	)		(1,193	)
Interest and other expenses		(54	)		(35	)		(117	)		(35	)
Other income and expenses:
Interest and other income - related party		323			528			1,119			1,773
Interest and other expenses		(46	)		—
Interest and other income		1			4			93			41
Interest and other income - related party		—			424
Total other income		270			497			1,095			1,779
Interest and other income		4			42
Loss from continuing operations		(446	)		(292	)		(1,594	)		(554	)
Total other income (expense)		(42	)		466
Gain on disposal of discontinued operations		—			—			41			—
Loss from continuing operations		(2,291	)		(727	)
Loss from discontinued operations		(~~3,300~~114	)		(6967	)		~~(3,286~~	)		~~(340~~	)
Net loss		(32,~~746~~405	)		(~~361~~794	)		~~(4,839~~	)		~~(894~~	)
Accrual of dividends related to preferred stock		(4—	)		(4	)		~~(12~~	)		~~(12~~	)
Gain on payments of dividends of preferred stock		—			—			8			8
Net loss attributed to common stock	$	(2,405	)	$	(798	)
Net loss attributed to common stock	$	(3,750	)	$	(365	)	$	(4,843	)	$	(898	)
Loss per common share from continuing operations	$	(5.86	)	$	(1.83	)
Loss per common share from continuing operations	$	(1.15	)	$	(0.74	)	$	(4.05	)	$	(1.36	)
Loss per common share from discontinued operations		(0.29	)		(0.17	)
Loss per common share from discontinued operations		(8.44	)		(0.17	)		(8.23	)		(0.83	)
Net loss per common share, basic and diluted	$	(6.15	)	$	(2.00	)
Net loss per common share, basic and diluted	$	(9.59	)	$	(0.91	)	$	(12.28	)	$	(2.19	)
Weighted average common shares outstanding:
Weighted average common shares outstanding:
Basic and diluted		390,916			399,239
Basic and diluted		390,916			401,941			394,367			410,266

The accompanying Notes to Consolidated Condensed Financial Statements are

an integral part of these Statements.

HKN, INC.

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE ~~INCOME (~~LOSS)

(Unaudited, in thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
	Three Months Ended March 31,
	2014			2013			2014			2013
	2015			2014
Net loss	$	(32,~~746~~405	)	$	(~~361~~794	)	$	~~(4,839~~	)	$	~~(894~~	)
Foreign currency translation adjustments		(~~652~~455	)		~~963~~93			~~(137~~	)		~~(331~~	)
Unrealized gain (loss) on investments		(7,089	)		4,903			(10,146	)		(3,501	)
Unrealized loss on investments		(2,015	)		(4,552	)
Other comprehensive income (loss)		(7,741	)		5,866			(10,283	)		(3,832	)
Other comprehensive loss		(2,470	)		(4,459	)
Comprehensive income (loss)	$	(11,487	)	$	5,505		$	(15,122	)	$	(4,726	)
Comprehensive loss	$	(4,875	)	$	(5,253	)

The accompanying Notes to Consolidated Condensed Financial Statements

are an integral part of these Statements.

HKN, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

	Nine Months Ended September 30,
	Three Months Ended March 31,
	2014			2013
	2015			2014
Cash flows from operating activities:
Net loss	$	(42,~~839~~405	)	$	(~~894~~794	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation, depletion and amortization		~~503~~280			~~555~~133
Stock-based compensation expense		159			30
Stock-based compensation expense (benefit)		(92	)		53
Gain on disposal of discontinued operations		(41	)		—
Loss on sale of assets		3			—
Loss contingency on discontinued operations		3,100			—
Amortization of note receivable - related party transaction fee		—			(42	)
Gain on sale of assets		(47	)		—
Amortization of note receivable - related party transaction fee		(112	)		(236	)
Other		—			(16	)
Change in operating assets and liabilities:
Accounts receivable and accounts receivable - related party		2841			~~(255~~33	)
Prepaid assets and other		~~(89~~61	)		(~~210~~68	)
Trade payables and other		(~~704~~88	)		~~309~~(628	)
Net cash used in operating activities - continuing operations		(2,~~042~~200	)		(~~717~~1,313	)
Net cash provided by (used in) operating activities - discontinued operations		67(715	)		~~(163~~29	)
Net cash used in operating activities		(12,~~975~~915	)		(~~880~~1,284	)
Cash flows from investing activities:
Capital expenditures		(~~6,781~~372	)		(32,~~730~~293	)
Purchase of Global shares		(422	)		(32	)
Net proceeds from sales of assets		1			—
Net proceeds from sales of assets		271			55
Repayment of note receivable - related party		—			1,500
Origination fee from note receivable - related party restructuring		—			340
Change in restricted cash		—			(50	)
Repayment of note receivable - related party		4,500			3,500
Net cash used in investing activities		(371	)		(843	)
Change in restricted cash		(50	)		—
Net cash provided by (used in) investing activities		(2,482	)		133
Cash flows from financing activities:
Principal payments on capital lease obligations		(122	)		—
Principal payments on note payable obligations		(63	)		—
Purchase of treasury stock		(847	)		(2,966	)
Principal payments on capital lease obligations		(91	)		—
Net cash used in financing activities		(969	)		(2,966	)
Purchase of treasury stock		—			(319	)
Net decrease in cash and cash equivalents		(5,426	)		(3,713	)
Net cash used in financing activities		(154	)		(319	)
Cash and cash equivalents at beginning of period		14,302			19,286
Net decrease in cash and cash equivalents		(3,440	)		(2,446	)
Cash and cash equivalents at end of period	$	8,876		$	15,573
Cash and cash equivalents at beginning of period		14,502			14,302
Cash and cash equivalents at end of period	$	11,062		$	11,856
Supplemental cash disclosures:
Cash paid for interest	$	8944		$	—
Noncash financing activities:
Equipment acquired through capital lease obligations	$	844		$	—

The accompanying Notes to Consolidated Condensed Financial Statements

are an integral part of these Statements.

HKN, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

~~September~~March 3031, ~~2014~~2015 and ~~2013~~2014

(unaudited)

(1) BASIS OF PRESENTATION

Our accompanying consolidated condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to these rules and regulations, although we believe that the disclosures made are adequate to prevent the information presented from being misleading. In our opinion, these consolidated condensed financial statements contain all adjustments necessary to present fairly our financial position as of ~~September~~March 3031, ~~2014~~2015 and December 31, ~~2013~~2014, the results of our operations for the ~~three~~ ~~and nine~~ three months ~~presented~~ended asMarch ~~of September 30~~31, ~~2014~~2015 and ~~2013~~2014 and changes in our cash flows for the ~~nine~~three months ~~presented~~ended ~~as of~~March ~~September 30~~31, ~~2014~~2015 and ~~2013~~2014. The December 31, ~~2013~~2014 consolidated condensed balance sheet information is derived from audited financial statements. All adjustments represent normal recurring items. These consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2013~~2014. Certain prior year amounts have been reclassified to conform to the ~~2014~~2015 presentation.

The preparation of financial statements in conformity with U.S. 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 financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from these estimates. The results of operations for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2014~~2015 are not necessarily indicative of the results to be expected for the full year.

Principles of Consolidation – The consolidated condensed financial statements include the accounts of all companies that we, through our direct or indirect ownership or shareholding, were provided the ability to control their operating policies and procedures. All significant intercompany balances and transactions have been eliminated.

As a result of the sales of our Gulf Coast oil and gas properties and the abandonment of our coalbed methane projects during 2011, any remaining Gulf Coast oil and gas and coalbed methane activities are included as discontinued operations on the consolidated condensed balance sheets, consolidated condensed statements of operations and consolidated condensed statements of cash flows for all periods presented.

Accumulated Other Comprehensive Income – Comprehensive income includes changes in stockholders’ equity during the periods that do not result from transactions with stockholders. Changes in our accumulated other comprehensive income during the period are as follows (in thousands):

	Foreign Currency Translation Adjustments			Unrealized Gain (Loss) on Investments			Accumulated Other Comprehensive Income (Loss)
	Accumulated Other Comprehensive Income as of December 31, 2014			Current Period Unrealized Loss			Accumulated Other Comprehensive Loss as of March 31, 2015
Balance as of December 31, 2013	$	1,215		$	7,605		$	8,820
Investment in Global	$	—		$	(2,015	)	$	(2,015	)
Current period other comprehensive loss		(137	)		(10,146	)		(10,283	)
Foreign Currency Translation Adjustments		—			(455	)		(455	)
Balance as of September 30, 2014	$	1,078		$	(2,541	)	$	(1,463	)
	$	—		$	(2,470	)	$	(2,470	)

Fair Value of Financial Instruments – Financial instruments are stated at fair value as determined in good faith by management. Factors considered in valuing individual investments include, without limitation, available market prices, reported net asset values, marketability, restrictions on disposition, current financial position and operating results, and other pertinent information. ~~(see~~See Note 75 – “Fair Value Measurements”) for more information.

We carry our financial instruments, which include cash, restricted cash, and our common stock investment in Global ~~Energy Development PLC (“Global”) and our Global note receivable,~~ at their estimated fair values. Our investment in ordinary shares of Global has been designated as available for sale rather than a trading security. The associated unrealized gains and losses on our available for sale investment are recorded to other comprehensive income until realized and reclassified into earnings using specific identification. The fair value of our investment in the ordinary shares of Global is based on prices quoted in an active market. Our investment in Global is classified as a non-current asset in our accompanying consolidated condensed balance sheets.

Translation of Non-U.S. Currency Amounts – Our investment in Global is subject to foreign currency exchange rate risk as Global’s ordinary shares are denominated in British pounds sterling. Translation adjustments are ~~included~~recorded into other comprehensive income until ~~the~~realized ~~investment~~through issale ~~sold~~or impairment and reclassified into earnings.

Property and Equipment – We recorded depreciation expense related to other property and equipment of $21 thousand and $1419 thousand for the three months ~~and $62 thousand and $43 thousand for the nine months~~ ended ~~September~~March 3031, ~~2014~~2015 and ~~2013~~2014, respectively. Depreciation, depletion and amortization expense for oil and gas producing properties and related equipment was $~~104~~47 thousand and $~~146~~63 thousand for the three months ended March 31, 2015 and ~~$287~~2014, ~~thousand~~respectively. During January 2015, the Arctic Star plant was fully commissioned and subject to depreciation. We recorded depreciation expense of $~~358~~161 thousand related to the Arctic Star plant for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015. ~~and~~Of ~~2013~~this depreciation expense, ~~respectively~~$36 thousand was related to capital lease assets for the three months ended March 31, 2015.

Capital Leases – During the second quarter 2014, we leased equipment for the Arctic Star plant under two separate capital leases which each have two year minimum lease terms. These leases include options to renew and/or purchase the leased property. ~~These assets are included in plant, property and equipment in our consolidated condensed balance sheets.~~ At ~~September~~March 3031, ~~2014~~2015, total assets acquired under capital leases ~~were~~was $844 thousand., ~~There~~net ~~was~~of noaccumulated amortization ~~expense~~of ~~for~~$122 ~~the~~thousand, ~~nine~~and ~~months~~was ~~ended~~included ~~September~~in ~~30, 2014, as~~ the ~~assets~~ ~~had~~Arctic ~~not~~Star ~~been~~plant ~~placed~~in ~~into~~our ~~service~~consolidated ascondensed ofbalance ~~September 30, 2014~~sheets.

At ~~September~~March 3031, ~~2014~~2015, ~~the~~ the total capital lease obligation was $~~674~~514 thousand, of which $~~392~~449 thousand was classified as a short-term liability and $~~282 thousand~~65 thousand was classified as a long-term liability in our consolidated condensed balance sheets. Capital lease interest expense was $5442 thousand for the three months ~~and $117 thousand for the nine months~~ ended ~~September~~March 3031, ~~2014~~2015. ~~The following is a schedule of remaining future minimum lease payments under capital leases (in thousands):~~

Intangible Assets – Our intangible assets consist of patents acquired in connection with our investment in BriteWater International, Inc. (“BWI”). Our patents were valued at $2.6 million on their acquisition date and are amortized on a straight-line basis over a period of 6-21 years, based on their respective contractual lives. Accumulated amortization in the amount of $1.2 million has been recorded on these patents to date. We have recorded amortization expense related to these patents of $51 thousand for both the three months ended March 31, 2015 and 2014. Patent annuity fees and legal fees related to the maintenance of our existing patents are expensed as incurred and recorded within selling, general and administrative expenses in our consolidated condensed statements of operations.

Year Ending December 31,
	2014	$	137
	2015		544
	2016		173
	Total minimum lease payments		854
	Less: Amount representing interest (1)		(180	)
	Present value of minimum lease payments	$	674

Investment in Global – Our policy is to review our investment in Global semi-annually or more often if any indicators of impairment become known. We continuously monitor macroeconomic indicators and track Global’s stock price volatility for any downward trends in the market. We also review public financial information including Global’s issued financial statements and investor presentations, as well as financial analysts’ reviews and recommendations for any indicators of an other than temporary impairment in our carrying value. We also assess internally our ability and intent to hold our investment in Global should the fair value drop below our cost. Any resulting other than temporary impairment would be immediately recognized in earnings. We did not recognize any other than temporary impairment for the three months ended March 31, 2015. See Note 4 – “Investment in Global” for further discussion.

~~__________________________~~Other Assets – At March 31, 2015, other assets included $217 thousand in prepaid drilling costs related to the drilling and completion of wells held by HKN Bakken, Inc. (“HBI”), $20 thousand in deposits related to the Arctic Star site lease and facility and restricted cash of $50 thousand for a Letter of Credit required for the Arctic Star plant site lease.

~~(1)~~Accrued Liabilities ~~Amount~~and toOther ~~reduce~~– ~~minimum~~At ~~lease~~March ~~payments~~31, to2015, ~~fair~~accrued ~~value~~liabilities asand ~~calculated~~other byincluded ~~the~~approximately ~~imputed~~$161 ~~interest rate~~thousand atin ~~lease~~accrued ~~inception~~capital, operating ~~since~~and ~~the~~property ~~present~~tax ~~value~~costs ofrelated to the ~~minimum~~Arctic ~~lease~~Star ~~payments~~plant asand ~~calculated~~approximately by$64 ~~the~~thousand ~~incremental~~in ~~borrowing~~accrued ~~rate~~capital and operating ~~exceeded~~costs ~~fair~~related ~~value~~to atthe ~~inception~~oil ofand ~~the~~gas ~~leases~~properties.

~~Intangible~~Notes ~~Assets~~ Payable – We ~~Our~~had ~~intangible~~notes ~~assets~~payable ~~consist~~ of ~~patents~~$63 ~~acquired~~thousand inat ~~connection~~December ~~with our investment in BriteWater International~~31, ~~Inc.~~2014 ~~(“BWI”). Our~~as ~~patents~~a ~~were~~result ~~valued~~of atthe ~~$2.6~~purchase ~~million~~of ona ~~their~~generator ~~acquisition date~~ and ~~are~~insurance ~~amortized~~premiums for onthe aArctic ~~straight-line~~Star ~~basis~~plant, ~~over~~both ~~a period~~ of ~~6-21 years,~~which ~~based~~were ~~on their respective contractual lives~~financed. ~~Accumulated~~The ~~amortization~~note inpayable for the ~~amount~~generator ~~of $1.1 million~~ has ~~been~~a ~~recorded~~two ~~on these~~year ~~patents~~term toat ~~date~~zero percent interest. WeThe ~~have~~note ~~recorded~~payable ~~amortization expense~~ related to ~~these~~the ~~patents~~insurance ofpremiums ~~$51~~has ~~thousand~~a ~~for~~ten ~~both~~month ~~the~~term ~~three months~~ and ~~$154~~bears ~~thousand~~interest ~~for~~at ~~both~~approximately ~~the~~2.4% ~~nine~~of ~~months~~the initial ~~ended~~note ~~September 30, 2014 and 2013, respectively~~amount. ~~Patent~~Both ~~annuity~~notes ~~fees~~were ~~and~~repaid ~~legal~~in ~~fees related~~full toduring the ~~renewal~~first ofquarter ~~our~~2015. ~~existing~~Interest ~~patents~~expense ~~are~~on ~~expensed~~the asinsurance ~~incurred~~premiums ~~and~~note was ~~recorded~~negligible ~~within~~for ~~selling,~~the ~~general~~three ~~and~~months ~~administrative expenses~~ended inMarch ~~our~~31, ~~consolidated condensed statements of operations~~2015.

~~Investment~~Asset inRetirement ~~Global~~Obligations – ~~Our~~We ~~policy~~recognize isthe topresent ~~review~~value ~~our~~of ~~investment~~asset inretirement ~~Global~~obligations ~~semi-annually~~beginning orin ~~more~~the ~~often~~period ifin ~~any~~which ~~indicators~~they ofare ~~impairment~~incurred ~~become known.~~if Wea ~~continuously~~reasonable ~~monitor~~estimate ~~macroeconomic~~of ~~indicators~~a ~~and~~fair ~~track~~value ~~Global’s~~can ~~stock~~be ~~price volatility for any downward trends in the market~~made. WeThe ~~also~~associated ~~review~~asset ~~public~~retirement ~~financial~~costs ~~information~~are ~~including~~capitalized ~~Global’s issued financial statements and investor presentations,~~ as ~~well~~part ~~as financial analysts’ reviews and recommendations for any indicators~~ of anthe ~~other than temporary impairment in our~~ carrying amount ~~value.~~of ~~Additionally, we monitor public reports regarding~~ the ~~reserves~~long-lived ~~in Colombia’s Middle Magdalena basin in which Global operates~~asset. WeOur ~~also~~asset ~~assess~~retirement ~~internally~~obligation ~~our~~is ~~ability~~a ~~and~~non-recurring ~~intent~~Level to3 ~~hold our investment in Global should the~~ fair value ~~drop~~measurement ~~below our~~and ~~cost.~~was ~~Any~~$2 ~~resulting~~thousand at ~~other~~March ~~than~~31, ~~temporary~~2015 ~~impairment~~and ~~would~~December be31, ~~immediately recognized in earnings~~2014. WeChanges ~~have~~to ~~not~~the ~~recognized~~liability ~~any such~~during ~~impairment~~the asthree ofmonths ~~September~~ended 30March 31, ~~2014.~~2015 ~~See~~were ~~Note 4 – “Investment in Global” for further discussion~~negligible.

~~Other~~Stock-Based ~~Assets –~~Compensation At– ~~September~~We ~~30,~~measure ~~2014,~~all ~~other~~stock-based ~~assets~~compensation ~~included~~awards ~~$346~~using ~~thousand~~a infair ~~prepaid~~value ~~drilling~~method ~~costs~~on ~~related~~the todate ~~the~~of ~~drilling~~grant and ~~completion~~recognize such expense ofin ~~wells~~our ~~held~~consolidated bycondensed ~~HKN~~financial ~~Bakken,~~statements ~~Inc.~~over ~~(“HBI”),~~the ~~$17~~requisite ~~thousand~~service inperiod ~~deposits~~on ~~related~~a straight-line basis. We use the Black-Scholes formula to determine the ~~Arctic~~fair ~~Star~~value ~~site~~of ~~lease~~stock-based ~~and~~compensation ~~facility and~~awards ~~restricted~~on ~~cash~~the date of ~~$50~~grant. ~~thousand~~The ~~for~~Black-Scholes aformula ~~Letter~~requires management ofto ~~Credit~~make ~~required~~assumptions ~~for~~regarding the ~~Arctic~~option ~~Star~~lives, ~~plant~~expected ~~site~~volatility, ~~lease~~and risk free interest rates.

~~Accrued~~We ~~Liabilities~~are also required to ~~and~~estimate ~~Other~~forfeitures –at Atthe ~~September~~time ~~30,~~of ~~2014~~grant, ~~accrued~~and ~~liabilities~~revise ~~and~~those ~~other~~estimates ~~included~~in ~~approximately~~subsequent ~~$572~~periods ~~thousand~~if inactual ~~accrued~~forfeitures differ from its ~~capital~~estimates ~~costs~~as ~~related~~a tocumulative adjustment in the ~~construction,~~period ~~installation~~of ~~and~~revision. ~~commissioning~~Stock ofcompensation is recorded only for those awards that are expected to vest. No forfeiture rate was applied during the ~~Arctic~~three ~~Star~~months ~~plant~~ended ~~and~~March ~~approximately~~31, ~~$122~~2015, ~~thousand~~as no further forfeitures were expected. However, in ~~accrued~~the ~~capital~~first ~~costs~~quarter ~~related~~2015, toa ~~the~~total ~~drilling~~of 18 thousand shares were forfeited and ~~completion~~stock compensation expense of ~~HBI~~$130 ~~wells~~thousand was ~~under~~reversed ~~development~~for those shares.

Stock-Based Compensation – We measure all stock-based compensation awards using a fair value method on the date of grant and recognize such expense in our consolidated financial statements over the requisite service period on a straight-line basis. We use the Black-Scholes formula to determine the fair value of stock-based compensation awards on the date of grant. The Black-Scholes formula requires management to make assumptions regarding the option lives, expected volatility, and risk free interest rates. Total stock-based compensation recognized within selling, general and administrative expenses in the Company’s consolidated condensed statements of operations was $53 thousand and $19 thousand for the three months and $159 thousand and $30 thousand for the nine months ended September 30, 2014 and 2013, respectively.

~~Recently~~Total ~~Issued~~stock-based ~~Accounting~~compensation ~~Pronouncements~~recognized –within ~~In April 2014~~selling, ~~FASB~~general ~~issued the Accounting Standards Update No. 2014-08, Reporting Discontinued Operations~~ and ~~Disclosures~~administrative ofexpenses ~~Disposals~~in ofthe ~~Components~~Company’s ofconsolidated ancondensed ~~Entity.~~statements ~~This standard revises the definition~~ of ~~a discontinued operation to~~operations ~~limit~~for the ~~circumstances~~three ~~under~~months ~~which~~ended aMarch ~~disposal~~31, or2015 ~~classification~~was asa ~~held~~benefit ~~for~~of ~~sale~~$92 ~~qualifies~~thousand, ~~for presentation~~ as a ~~discontinued operation.~~result ~~Amendments~~of inthe ~~this~~forfeitures ~~standard~~during ~~require~~the ~~expanded~~first ~~disclosures~~quarter 2015, ~~concerning a discontinued operation~~ and ~~the disposal of~~ an ~~individually-material~~expense ~~component~~ of an$53 ~~entity~~thousand ~~not qualifying as a discontinued operation. The standard is effective~~ for ~~annual~~the ~~and~~three ~~interim~~months ~~periods~~ended ~~beginning~~March ~~on or after December 15~~31, 2014 ~~and should be applied prospectively, with early adoption permitted~~. ~~We currently do not expect this standard to have any impact on our consolidated financial statements.~~

InRecently ~~May~~Issued ~~2014, the FASB issued~~ Accounting ~~Standards Update No. 2014-09 on revenue from contracts with customers. Under this new standard, revenue is recognized~~ atPronouncements ~~the~~– ~~time~~There aare ~~good~~currently orno ~~service~~newly isissued ~~transferred~~accounting topronouncements ~~a customer for the amount of consideration received for~~ that ~~specific~~are ~~good~~applicable orto ~~service. The~~our ~~standard~~business ~~is effective for interim and annual periods beginning after December 16, 2016, and early adoption is not permitted. Adoption is allowed by either the full retrospective~~ or ~~modified retrospective approach. We are currently evaluating which approach~~ ~~we will apply and~~ the ~~impact,~~presentation ifof ~~any, that this standard will have on~~ our consolidated condensed financial statements.

(2) BRITEWATER INTERNATIONAL, INC.

~~Our wholly-owned~~ BWI ~~subsidiary owns~~holds apatents ~~patented~~for oilfield emulsion breaking technology. This is a continuous process technology that can purify oilfield emulsions by breaking and separating the emulsions into oil, water and solids, thereby reducing the environmental impact and disposal costs of these waste materials while recovering valuable oil. ~~BWI~~This technology has ~~completed~~been ~~the~~successfully ~~design,~~tested ~~construction~~in ~~and~~multiple ~~installation~~refineries ofas ~~its~~well ~~first set~~as ofin ~~standardized~~a ~~modules~~demonstration in ~~which~~Prudhoe ~~can~~Bay, beAlaska, ~~used~~all ~~for~~of ~~both~~which ~~upstream~~confirmed ~~and~~the ~~downstream~~effectiveness ~~applications~~of in the ~~oil~~emulsion ~~and~~breaking ~~gas~~technology ~~industry, including processing oilfield and refinery emulsions~~ to recover valuable ~~oil~~ hydrocarbons and ~~oil~~reduce ~~spill remediation~~wastes.

BWI’s wholly-owned subsidiary, Arctic Star Alaska, Inc. (“Arctic Star”), ishas ina ~~the~~1,000 ~~process~~barrel ofper ~~commissioning~~day ~~these~~oilfield ~~modules~~waste ~~and~~processing ~~establishing~~plant located ~~operations~~in asDeadhorse, aAlaska. ~~mobile~~Although ~~waste~~the ~~processing~~Arctic Star plant onwas ~~the~~commissioned ~~North~~and ~~Slope~~ready offor ~~Alaska.~~use ~~Arctic~~in ~~Star~~the ~~currently~~first ~~holds~~quarter ~~contracts~~2015, ~~which~~the ~~grant~~plant ~~Arctic~~is ~~Star~~currently ~~the~~not ~~option~~economic todue ~~take title~~ to ~~oilfield~~a ~~waste~~low ~~generated~~availability inof ~~certain~~feedstock ~~fields~~and on the ~~North~~recent ~~Slope~~steep atdecline noin ~~cost~~oil ~~and~~prices. ~~sell~~As ~~any~~a ~~recovered~~result, in March ~~crude~~2015 ~~volumes~~the atplant ~~market~~was ~~prices~~idled. ~~The~~Although ~~Company~~management ~~continues~~will ~~negotiations~~continue to ~~enter~~monitor ~~into~~marketing ~~additional feedstock supply agreements~~conditions, ~~one~~it ~~of which~~is ~~was~~currently ~~obtained~~unknown inhow ~~April~~long ~~2014.~~the plant ~~Arctic~~will ~~Star~~remain ~~also~~idle ~~entered~~due ~~into~~to ancontinued ~~agreement~~uncertainty ~~for~~in ~~the~~long-term ~~sale~~crude ofpricing ~~100%~~as ofwell ~~its~~as ~~product~~oilfield ondrilling ~~the~~and ~~North~~development ~~Slope~~activities ~~during~~near ~~April~~the ~~2014~~plant.

BWI also has a completed purpose-built plant which was designed to break emulsions found in weathered lagoon pits. We have determined that as a result of current oil pricing and the age of the plant, it is not likely we will be able to deploy and operate the BWI weathered lagoon plant for its intended purpose in the near future.

~~BWI~~We ~~Contingency~~review –our long-lived ~~BWI~~assets ~~has~~for aimpairment ~~contingent~~whenever ~~liability~~events ofor ~~$800~~changes ~~thousand~~in ~~which~~circumstances ~~may~~indicate bethat ~~payable upon~~ the ~~conclusion~~carrying amount of ~~certain~~any ~~performance~~asset ~~events~~may ~~related~~not be recoverable. toAs ~~its~~a ~~weathered~~result, ~~lagoon~~these ~~plant.~~BWI ~~There~~assets were noimpaired ~~changes~~at toof ~~the~~December ~~BWI~~31, ~~liability~~2014. ~~recorded~~No additional impairment was recognized on these BWI assets during the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015.

(3) HKN BAKKEN, INC.

HBI holds non-operated working and royalty interests in properties strategically located in the Bakken and Niobrara shale oil plays. We invested in these assets because we believe they may present ~~significant~~ near-term growth potential and align well with our long term investment goals. WeDue ~~continue~~ to the ~~invest~~impact inof ~~HBI~~decreased oil prices on athe ~~non-operated~~ultimate ~~basis,~~economics of wells in ~~all~~these ~~phases~~plays, ofwe ~~the~~assess ~~oil~~each drilling opportunity on a case-by-case basis and ~~gas~~only ~~business,~~elect ~~including~~to ~~participation~~participate in ~~the~~wells ~~drilling,~~that ~~completion, operation~~we ~~and~~expect ~~maintenance~~to meet our return thresholds based upon our estimates of ultimate recoverable crude oil and natural gas, ~~wells.~~expertise ~~During~~of the ~~nine~~operator ~~months~~and ~~ended~~completed ~~September~~well 30cost from each project, ~~2014~~as well as other factors. As a result, we ~~invested~~plan ~~approximately~~to ~~$209 thousand~~participate inon ~~drilling~~a discretionary basis during 2015 and ~~completion~~anticipate ~~costs~~we will participate in fewer wells than past years.

During April 2014, we executed and closed on an agreement for the final dissolution of Gerrity Oil, LLC. In conjunction with this agreement, HBI sold its interest in four Bakken wells and a six acre parcel of land in Colorado for proceeds of approximately $271 thousand and recognized a gain on this sale of $47 thousand within interest and other income in our consolidated condensed statements of operations.

(4) INVESTMENT IN GLOBAL

Our non-current available for sale investment consists of our ownership of approximately 35% of Global’s outstanding ordinary shares. At ~~September 30~~March 31, 2015 ~~2014~~ and December 31, ~~2013~~2014, our investment in Global was equal to the market value of Global’s ordinary shares as follows (in thousands, except for closing price and exchange rate amounts):

	September 30, 2014		December 31, 2013
	March 31, 2015		December 31, 2014
Shares of Global Stock Held by HKN		12,805		12,~~462~~805
Closing Price of Global Stock	£	0.4640	£	0.9450
Foreign Currency Exchange Rate		1.~~6220~~4846		1.~~6574~~5586
Market Value of Investment in Global	$	97,~~450~~509	$	199,~~312~~979

The foreign currency translation adjustment of approximately $~~137~~455 thousand and the unrealized loss on investment of $~~10.1~~2 million for the changes in market value ~~between~~ between the two periods were recorded to other comprehensive income in stockholders’ equity during the ~~nine~~three months ended ~~September~~ ~~30,~~March ~~2014~~31, 2015.

~~During~~As ~~the~~of ~~nine~~March ~~months ended September 30~~31, ~~2014~~2015, we had ~~purchased~~a ancumulative ~~additional~~unrealized ~~343~~loss ~~thousand~~position ~~shares~~on ofour ~~Global~~investment ~~for~~in ~~approximately~~Global of $~~422~~2.5 ~~thousand~~million. Therefore, ~~increasing~~we assessed the decline in market value to determine whether it was considered a temporary or other than temporary impairment. After reviewing Global’s published annual report and considering our ~~ownership~~intent ~~from~~and 34ability to hold the investment, we determined the impairment to be temporary as of March 31, 2015.~~51%~~ However, we will continue to 35evaluate whether this investment is impaired in each subsequent reporting period until either the investment experiences a recovery of fair value up to its cost or the decline is considered to be an other than temporary impairment loss.~~46%.~~ The following table shows the gross unrealized losses and fair values for investments in an unrealized loss position, deemed to be temporary, and the length of time they have been in the position as of March 31, 2015 (in thousands):

As of September 30, 2014, we had a cumulative unrealized loss position on our investment in Global of $1.5 million. Therefore, we assessed the decline in market value to determine whether it was considered a temporary or other than temporary impairment. After reviewing Global’s published operational updates and plans and considering our intent and ability to hold the investment, the recent nature of the decline and analyzing the historical price volatility and increases in share price subsequent to this reporting date, we determined the impairment to be temporary as of September 30, 2014. However, we will continue to evaluate whether this investment is impaired in each subsequent reporting period until either the investment experiences a recovery of fair value up to its cost or the decline is considered to be other than temporary impairment loss. The following table shows the gross unrealized losses and fair values for investments in an unrealized loss position, deemed to be temporary, and the length of time they have been in the position as of September 30, 2014 (in thousands):

	March 31, 2015
	Less Than 12 Months					12 Months or Greater				Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Available for sale securities:
Investment in Global	$	7,509	$	(2,470	)	$	—	$	—	$	7,509	$	(2,470	)
Total	$	7,509	$	(2,470	)	$	—	$	—	$	7,509	$	(2,470	)

	September 30, 2014
	Less Than 12 Months					12 Months or Greater				Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Available for sale securities:
Investment in Global	$	9,450	$	(1,463	)	$	—	$	—	$	9,450	$	(1,463	)
Total	$	9,450	$	(1,463	)	$	—	$	—	$	9,450	$	(1,463	)

No unrealized loss position existed at December 31, 2014 due the recognition of an impairment loss of $937 thousand in December 2014.

No(5) FAIR ~~unrealized~~VALUE ~~loss position existed at December 31, 2013.~~MEASUREMENTS

(5) NOTES RECEIVABLE – RELATED PARTY

In March 2013, we entered into a new loan agreement (the “Global 2013 Note”) with Global to refinance the outstanding $5 million Global Note Receivable and the $12 million Global Loan into one $17 million note. The Global 2013 Note extended the maturity date to June 15, 2015 and increased the interest rate from 12.5% to 12.75%. Principal payments are required quarterly and began on March 31, 2013. To date, we have received $9.5 million in principal payments from Global. As of September 16, 2014, pursuant to provisions of the Global 2013 Note agreement, the interest rate charged was increased from 12.75% up to 13.5% per annum due to Global’s nonconformity with performance conditions as of June 30, 2014. The new stated interest rate will remain in effect until the maturity of the loan agreement. Accrued interest on the outstanding principal balance is due on each quarterly principal payment date.

We have received interest payments from Global of approximately $290 thousand and $478 thousand for the three months and $1 million and $1.5 million for the nine months ended September 30, 2014 and 2013, respectively. Payment of the Global 2013 Note is guaranteed by Global’s principal operating subsidiary. In connection with the new loan agreement, Global paid us a transaction fee of $340 thousand, of which $65 thousand was deferred and presented net of our long term notes receivable at September 30, 2014. The remaining deferred transaction fee will be recognized over the life of the loan. The remaining payments due to us under the new Global 2013 Note are as follows: $1.5 million due quarterly from December 31, 2014 through March 31, 2015 and $4.5 million due June 15, 2015.

Beginning June 30, 2014, the Global 2013 Note was classified as current because all quarterly payments on the Global 2013 Note had been received in accordance with the stated repayment terms, and we believe the remaining payments will also be made as scheduled. Previously, our related party loans were classified as long-term due to the historic uncertainty around the timing of collection in spite of the stated repayment terms in the agreements. We assess the collectability of our related party loan with Global on a semi-annual basis based on review of their publicly disclosed financial information. Additionally, we continually monitor all Global disclosures for any events that could adversely affect their liquidity or results of operations. As of the date of this quarterly report on Form 10-Q we do not have any reason to believe that our Global 2013 Note is not collectible or is impaired. Accordingly, we did not record any allowance for doubtful accounts related to our related party notes receivable at September 30, 2014.

(6) ASSET RETIREMENT OBLIGATION

We recognize the present value of asset retirement obligations beginning in the period in which they are incurred if a reasonable estimate of a fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. A summary of our asset retirement obligations as of September 30, 2014 is as follows (in thousands):

	Asset Retirement
Asset Category	Obligation			Estimated Life
Oil and gas producing properties	$	2	(1)	27.5 years

__________________________

(1) This is a recurring Level 3 fair value measurement. See Note 7 - “Fair Value Measurements” for further discussions of Level 3 valuation definitions.

The following table describes all changes to our asset retirement obligation liability during the nine months ended September 30, 2014 (in thousands):

	2014
Asset retirement obligation at beginning of period	$	2
Additions during the period		—
Revisions of estimates		—
Accretion expense		—
Asset retirement obligation at end of period	$	2

(7) FAIR VALUE MEASUREMENTS

We account for certain assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The accounting guidance establishes a framework for measuring fair value and a valuation hierarchy based upon the transparency of inputs used in the valuation of an asset or liability. Classification within the hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The valuation hierarchy contains three levels:

Level 1 – Valuation inputs are unadjusted quoted market prices for identical assets or liabilities in active markets.

Level 2 – Valuation inputs are quoted prices for identical assets or liabilities in markets that are not active, quoted market prices for similar assets and liabilities in active markets and other observable inputs directly or indirectly related to the asset or liability being measured.

Level 3 – Valuation inputs are unobservable and significant to the fair value measurement.

The following tables present recurring financial assets which are carried at fair value as of ~~September~~March 3031, ~~2014~~2015 and December 31, ~~2013~~2014 (in thousands):

September 30, 2014

March 31, 2015

Level 1

~~Level 1~~

Level 2

~~Level 2~~

Level 3

~~Level 3~~

Investment in Global (1)

97,~~450~~509

—

December 31, 2013

December 31, 2014

Level 1

~~Level 1~~

Level 2

~~Level 2~~

Level 3

~~Level 3~~

Investment in Global (1)

199,~~312~~979

—

____________________________________________________

(1)

Global’s ordinary shares are publicly traded on the Alternative Investment Market (“AIM”), a market operated by the London Stock Exchange, with quoted prices in active markets. Accordingly, the fair value measurements of these securities have been classified as Level 1.

13(6) DISCONTINUED OPERATIONS

(8) DISCONTINUED OPERATIONS

As a result of the sales of our Gulf Coast oil and gas properties and the abandonment of our coalbed methane projects during 2011, all related activities are included as discontinued operations on the consolidated condensed balance sheets and consolidated condensed statements of operations for all periods presented.

~~The~~Current ~~carrying~~assets ~~amounts~~at ofMarch ~~the~~31, ~~major~~2015 ~~classes~~and ofDecember 31, 2014 include assets ~~and~~of ~~liabilities~~discontinued operations of $158 thousand, for accounts receivable related to the 2011 sale of our ~~discontinued~~Gulf Coast oil and gas ~~operations~~properties, ~~are~~which ~~summarized~~is ~~below~~fully ~~(in thousands):~~reserved.

	September 30,		December 31,
	2014		2013
Current Assets:
Accounts receivable, net	$	3	$	6
Total Current Assets		3		6
Total Assets of Discontinued Operations	$	3	$	6
Current Liabilities:
Trade payables	$	64	$	29
Revenues and royalties payable		18		18
Accrued EPA contingency		3,100		—
Accrued liabilities and other		101		113
Total Current Liabilities		3,283		160
Total Liabilities of Discontinued Operations	$	3,283	$	160

The carrying amounts of the major classes of liabilities for our discontinued oil and gas operations are summarized below (in thousands):

~~Our Accrued Liabilities and Other at September 30, 2014 consist of legal fees related to the XPLOR Energy Litigation and Main Pass Environmental Investigations (see Note~~ 12 ~~– “Contingencies”).~~

Cash used by discontinued operations during the nine months ended September 30, 2014 is mainly related to legal costs resulting from the sale of the oil and gas properties net of any related insurance recoveries. Upon resolution of the XPLOR Energy litigation and regulatory matters, no significant activities are expected related to these discontinued operations.

	March 31,		December 31,
	2015		2014

Current Liabilities:

Trade payables	$	2	$	3
Revenues and royalties payable		18		18
Accrued commitments and contingencies		2,390		3,165
Accrued liabilities and other		112		51
Total Current Liabilities		2,522		3,237
Total Liabilities of Discontinued Operations	$	2,522	$	3,237

~~The~~Accrued ~~revenues~~Commitments and Contingencies at March 31, 2015, consist of a $2.3 million commitment, which is net ~~loss~~of the first installment payment of $775 thousand, ~~before~~and ~~income~~a ~~tax~~$65 ~~associated~~thousand ~~with~~contingency ~~our~~related ~~discontinued~~to ~~oil~~the Main Pass Environmental Investigations. Our Accrued Liabilities and ~~gas~~Other ~~operations~~at ~~are~~March 31, as2015 ~~follows~~consist ~~(in~~of ~~thousands):~~legal fees related to the XPLOR Energy Litigation and Main Pass Environmental Investigations. See Note 10 – “Commitments and Contingencies” for additional information.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Revenues and other:
Oil and gas operations	$	—		$	—		$	—		$	—
Oil and gas processing and handling income		—			—			—			—
Total revenues from discontinued operations	$	—		$	—		$	—		$	—
Loss from discontinued operations before taxes	$	(3,300	)	$	(69	)	$	(3,286	)	$	(340	)

Cash used by discontinued operations during the three months ended March 31, 2015 is mainly related to making the first installment payment related to the Main Pass Environmental Investigations commitment and legal costs resulting from litigation related to the sale of the oil and gas properties net of any related insurance recoveries. Upon resolution of the XPLOR Energy litigation and regulatory matters, no significant activities are expected related to these discontinued operations.

WeThere ~~recognized~~were ano ~~gain of~~revenues ~~$41~~or ~~thousand~~disposal-related losses on the ~~2011~~sale ~~disposal~~ of our Gulf Coast oil and gas properties recognized during the ~~nine~~three months ended ~~September 30~~March 31, 2015 and 2014. ~~due to~~We ahad ~~refund~~losses from discontinued operations of a$114 ~~drilling~~thousand ~~prepayment~~and ~~related~~$67 tothousand ~~retained~~for ~~plugging~~the three months ended March 31, 2015 and ~~abandonment~~2014, respectively, primarily related to legal costs. Nowe ~~losses~~continue ~~were~~to ~~recognized~~incur onfor ~~this~~litigation ~~disposal~~and regulatory matters related into the ~~first~~oil ~~nine~~and ~~months~~gas ofproperties ~~2013~~we sold in 2011.

(7) SEGMENT INFORMATION

We currently have one reportable segment consisting of our investment in BWI which owns a patented oilfield emulsion breaking technology. This is a continuous process technology that can purify oilfield emulsions by breaking and separating the emulsions into oil, water and solids, thereby reducing the environmental impact and disposal costs of these waste materials while recovering valuable oil. See Note 2 – “BriteWater International, Inc.” for further discussion.

We have included activity of our parent company, HKN, in our disclosure to reconcile to our consolidated operating loss and total assets. HKN includes our investment in Global, our non-operated working interests in properties held by HBI, mineral interests held in Texas, performance of general corporate activities such as corporate reporting and governance, financing, management and growth of current operations and the evaluation of new investment opportunities. Our accounting policies for each of our operating segments are the same as those for our consolidated condensed financial statements. Intersegment interest income and intersegment expenses between our parent company and BWI have been eliminated in consolidation. There were no material intersegment sales or transfers for the periods presented.

Our financial information, expressed in thousands, for each of our operating segments for the three months ended March 31, 2015 and 2014 is as follows:

	Three Months Ended March 31, 2015

	HKN			BWI			Eliminations			Consolidated

Oil and gas revenues	$	82		$	—		$	—		$	82
Oil and gas operating expenses		(42	)		—			—			(42	)
Arctic Star plant operating expenses		—			(346	)		—			(346	)
Selling, general and administrative expenses		(1,653	)		(10	)		—			(1,663	)
Depreciation, depletion and amortization		(63	)		(217	)		—			(280	)
Interest and other expenses		(1	)		(198	)		153			(46	)
Interest and other income - related parties		153			—			(153	)		—
Interest and other income		4			—			—			4
Segment loss from continuing operations	$	(1,520	)	$	(771	)	$	—		$	(2,291	)
Capital Expenditures	$	81		$	291		$	—		$	372
Total Assets	$	32,741		$	7,679		$	(11,823	)	$	28,597

	Three Months Ended March 31, 2014

	HKN			BWI			Eliminations			Consolidated

Oil and gas revenues	$	138		$	—		$	—		$	138
Oil and gas operating expenses		(36	)		—			—			(36	)
Selling, general and administrative expenses		(937	)		(225	)		—			(1,162	)
Depreciation, depletion and amortization		(77	)		(56	)		—			(133	)
Interest and other expenses		—			(68	)		68			—
Interest and other income - related parties		492			—			(68	)		424
Interest and other income		42			—			—			42
Segment loss from continuing operations	$	(378	)	$	(349	)	$	—		$	(727	)
Capital Expenditures	$	45		$	2,248		$	—		$	2,293
Total Assets	$	45,756		$	19,538		$	(4,174	)	$	61,120

(8) STOCKHOLDERS’ EQUITY

Common Stock – No changes in the number of common shares held occurred during the three months ended March 31, 2015. There were 390,916 shares issued and outstanding as of March 31, 2015 and December 31, 2014.

Treasury Stock – At March 31, 2015 and December 31, 2014, we held no shares of treasury stock. In January 2013, we announced that our Board of Directors authorized the cancellation of our amended September 2005 stock repurchase plan and authorized a new stock repurchase program which allows us to buy back up to 45 thousand shares of our common stock. During the three months ended March 31, 2015, we did not repurchase any shares of our common stock. As of March 31, 2015, 582 shares remained available for repurchase under our repurchase program.

Additional Paid in Capital – Additional paid in capital decreased by approximately $93 thousand during the three month period ended March 31, 2015 primarily due to a benefit recorded related to the BWI stock option forfeitures during the period.

~~The~~(9) EARNINGS loss from discontinued operations for the three and nine months ended September 30, 2014 is primarily due to a $3.1 million contingency recorded in the third quarter 2014 related to the Main Pass Environmental Investigations (~~see~~LOSS) ~~Note~~PER ~~12 – “Contingencies”).~~SHARE

The following table sets forth the computation of basic and diluted loss per share for the three months ended March 31, 2015 and 2014 (~~9) SEGMENT~~in ~~INFORMATION~~thousands, except per share data):

We currently have one reportable segment consisting of our investment in BWI which is managed separately. Our BWI operating segment owns a patented oilfield emulsion breaking technology. This is a continuous process technology that can purify oilfield emulsions by breaking and separating the emulsions into oil, water and solids, thereby reducing the environmental impact and disposal costs of these waste materials while recovering valuable oil. See Note 2 – “BriteWater International, Inc.” for further discussion.

	Three Months Ended March 31, 2015								Three Months Ended March 31, 2014
	Net Loss Attributed to Common Stock			Weighted- Average Shares		Per Share Loss			Net Loss Attributed to Common Stock			Weighted- Average Shares			Per Share Loss
Basic EPS:
Loss from continuing operations	$	(2,291	)			$	(5.86	)	$	(731	) (1)				$	(1.83	)
Loss from discontinued operations		(114	)				(0.29	)		(67	)					(0.17	)
Net loss attributed to common stock	$	(2,405	)		391	$	(6.15	)	$	(798	)		399		$	(2.00	)
Effect of dilutive securities
Preferred stock		—			—		—			—			—	(2)		—
Diluted loss per share	$	(2,405	)		391	$	(6.15	)	$	(798	)		399		$	(2.00	)

~~We have included activity~~ of our parent company, HKN, in our disclosure to reconcile to our consolidated operating loss and total assets. HKN includes our investment in Global, our non-operated working interests in properties held by HBI, mineral interests leased in Texas, performance of general corporate activities such as corporate reporting and governance, financing, management and growth of current operations and the evaluation of new investment opportunities. Our accounting policies for each of our operating segments are the same as those for our consolidated condensed financial statements. Intersegment interest income and intersegment expenses between our parent company and BWI have been eliminated in consolidation. There were no material intersegment sales or transfers for the periods presented. __________________________

At(1) ~~September~~Includes ~~30,~~accrual ~~2013, we reported our investment in Gerrity Oil as a reportable segment. In January 2013, we made the decision to dissolve the joint venture and obtain a direct ownership interest in our 50% portion~~ of ~~the Gerrity Oil assets and properties under a newly formed corporation~~dividends, ~~HBI.~~net ~~After this decision, the oil and gas operations~~ of the ~~newly~~gain ~~formed~~on ~~HBI~~dividends ~~entity~~paid ~~were~~with ~~absorbed~~common ~~by HKN personnel throughout 2013 and no additional resources were allocated to the management of those operations. Therefore~~shares, werelated ~~did not consider our investment in HBI~~ to bepreferred astock ~~separate operating segment as~~ of ~~December~~$4 ~~31,~~thousand ~~2013.~~for ~~Since Gerrity Oil was previously reported as a separate reportable segment at September 30, 2013, that period has been restated to be included with~~ the ~~HKN parent company activity in order to be consistent with the~~ three ~~and nine~~ months ended ~~September~~March 3031, 2014.

~~Our~~(2) ~~financial~~Includes ~~information, expressed~~11 inshares ~~thousands,~~of ~~for~~our ~~each~~common ofstock related to our ~~operating~~Series ~~segments~~G1 and Series G2 preferred stock for the three ~~and nine~~ months ended ~~September~~March 3031, 2014. These shares were issuable upon their conversion in the period presented and ~~2013~~were isexcluded from the calculation of diluted earnings per share as ~~follows:~~ their effect would have been antidilutive. In December 2014, we repurchased all outstanding shares of our Series G1 and Series G2 preferred stock. As a result, there is no dilutive effect for the three months ended March 31, 2015.

	Three Months Ended September 30, 2014
	HKN			BWI			Eliminations			Consolidated
Oil and gas revenues	$	339		$	—		$	—		$	339
Oil and gas expenses		(58	)		—			—			(58	)
Selling, general and administrative expenses		(571	)		(250	)		—			(821	)
Depreciation, depletion and amortization		(118	)		(58	)		—			(176	)
Interest and other expenses		—			(119	)		65			(54	)
Interest and other income - related parties		388			—			(65	)		323
Interest and other income		1			—			—			1
Segment loss from continuing operations	$	(19	)	$	(427	)	$	—		$	(446	)
Capital Expenditures	$	348		$	1,331		$	—		$	1,679
Total Assets	$	39,326		$	23,615		$	(9,209	)	$	53,732

(10) COMMITMENTS AND CONTINGENCIES

XPLOR Energy Litigation – Pursuant to a PSA dated as of November 17, 2011 between our subsidiary XPLOR and Texas Petroleum Investment Company (“TPIC”), XPLOR sold to TPIC its oil and gas production assets and related operations at its Main Pass 35 field. The closing of the transaction occurred on November 17, 2011 but was effective as of October 1, 2011. On November 21, 2011, TPIC informed XPLOR that they had discovered defects in the salt water disposal system at Main Pass resulting in a salt water spill in the Gulf of Mexico, which had been reported to regulatory authorities.

TPIC has filed a lawsuit against XPLOR in the 236^th Judicial District Court, Tarrant County, Texas. The case is styled: Texas Petroleum Investment Company vs. XPLOR Energy SPV-1, Inc., Richard Cottle, Sarah Gasch, and John Hewitt. In the lawsuit, TPIC has asserted claims of fraud, fraudulent inducement, negligent misrepresentation, and indemnity related to its purchase of a production platform and associated assets from XPLOR. TPIC’s claims focus on alleged salt water system defects, related repairs to the facilities, and purported representations regarding the condition of the platform and associated assets. TPIC is seeking an unstated amount of alleged actual and exemplary damages as well as costs and fees. We intend to vigorously defend any assertions related to the above lawsuit. Accordingly, as of March 31, 2015, we did not record a contingency related to TPIC’s allegations. Based upon information known to date, the range of estimated loss if TPIC were to prevail on its claims is currently estimated not to exceed $2.5 million in damages, costs, and fees.

	Three Months Ended September 30, 2013
	HKN			BWI			Eliminations			Consolidated
Oil and gas revenues	$	309		$	—		$	—		$	309
Oil and gas expenses		(60	)		—			—			(60	)
Selling, general and administrative expenses		(661	)		(166	)		—			(827	)
Depreciation, depletion and amortization		(157	)		(54	)		—			(211	)
Interest and other expenses		(33	)		(174	)		172			(35	)
Interest and other income - related parties		700			—			(172	)		528
Interest and other income		3			1			—			4
Segment income (loss) from continuing operations	$	101		$	(393	)	$	—		$	(292	)
Capital Expenditures	$	227		$	1,527		$	—		$	1,754
Total Assets	$	62,828		$	16,273		$	(10,787	)	$	68,314

Main Pass Environmental Investigations – In January 2013, we were notified by the Louisiana Department of Environmental Quality (“LDEQ”) of an investigation and potential penalty related to the TPIC allegations of improper salt water disposal at the Main Pass 35 field previously owned by our subsidiary XPLOR Energy SPV-1, Inc. and previously operated by our subsidiary, XPLOR Energy Operating Company. The matter is styled: In the Matter of Xplor Energy Operating Company, Louisiana Division of Administrative Law Docket No. 2014-2388-EQ, Louisiana Department of Environmental Quality (“LDEQ”) Tracking No. WE-CN-12-01101. In October 2014, a telephone status conference was held with the LDEQ and the Administrative Law Judge (“ALJ”) handling this matter, and the Company held a subsequent meeting at the LDEQ offices during November 2014. Following these meetings, the parties agreed to pursue settlement discussions and are currently engaged in this process. At March 31, 2014, we have a $65 thousand contingency within liabilities of discontinued operations in our consolidated condensed balance sheets related to these investigations.

	Nine Months Ended September 30, 2014
	HKN			BWI			Eliminations			Consolidated
Oil and gas revenues	$	794		$	—		$	—		$	794
Oil and gas expenses		(170	)		—			—			(170	)
Selling, general and administrative expenses		(2,131	)		(679	)		—			(2,810	)
Depreciation, depletion and amortization		(330	)		(173	)		—			(503	)
Interest and other expenses		—			(295	)		178			(117	)
Interest and other income - related parties		1,297			—			(178	)		1,119
Interest and other income		93			—			—			93
Segment loss from continuing operations	$	(447	)	$	(1,147	)	$	—		$	(1,594	)
Capital Expenditures	$	351		$	6,430		$	—		$	6,781
Total Assets	$	39,326		$	23,615		$	(9,209	)	$	53,732

In connection with the previously disclosed violations of the Federal Water Pollution Control Act by our discontinued XPLOR subsidiary, on March 4, 2015, the U.S. District Court for the Eastern District of Louisiana accepted XPLOR’s plea agreement entered into in 2014 with the U.S. Attorney’s office in New Orleans, Louisiana. During the quarter ended March 31, 2015, XPLOR paid an aggregate of $775 thousand in penalties pursuant to the plea agreement. At March 31, 2015, we have a remaining $2.3 million commitment within liabilities of discontinued operations in our consolidated condensed balance sheets for the remaining outstanding balance of the penalty owed by XPLOR, to be paid in quarterly installments through December 2015.

	Nine Months Ended September 30, 2013
	HKN			BWI			Eliminations			Consolidated
Oil and gas revenues	$	823		$	—		$	—		$	823
Oil and gas expenses		(126	)		—			—			(126	)
Selling, general and administrative expenses		(1,985	)		(490	)		—			(2,475	)
Depreciation, depletion and amortization		(391	)		(164	)		—			(555	)
Interest and other expenses		(35	)		(436	)		436			(35	)
Interest and other income - related parties		2,209			—			(436	)		1,773
Interest and other income		41			—			—			41
Segment income (loss) from continuing operations	$	536		$	(1,090	)	$	—		$	(554	)
Capital Expenditures	$	553		$	3,177		$	—		$	3,730
Total Assets	$	62,828		$	16,273		$	(10,787	)	$	68,314

Point Au Fer Lawsuit – During the second quarter 2013, we learned HKN, Inc. was named in a lawsuit filed in the 32nd Judicial District Court for the Parish of Terrebonne, Louisiana by Point Au Fer, L.L.C., and The Roman Catholic Church of the Archdiocese of New Orleans. The case is styled: Point Au Fer, L.L.C., and The Roman Catholic Church of the Archdiocese of New Orleans v. ExxonMobil Oil Corporation, et al, No. 169160. In the lawsuit, the plaintiffs have alleged that real property they own in Terrebonne Parish has been environmentally damaged as a result of oil and gas exploration activities of twenty different defendants. The plaintiffs seek damages for testing and remediation of the property, property stigma, loss of use of land and lost profits, civil fruits for defendants trespass, land loss and subsidence, punitive or exemplary damages and attorney’s fees. Per Louisiana law, no actual dollar amount of damages has been alleged in the Petition. With specific regard to HKN, Inc., out of over one hundred wells identified in the Petition, HKN, Inc. only drilled one well, the MA Smythe Nelson #1, which was a dry hole. The MA Smythe Nelson #1 was drilled on June 2, 1980 and plugged and abandoned on July 12, 1980. We have and intend to continue to vigorously defend any assertions related to the above lawsuit. Due to the inherent uncertainties of the lawsuit at this time, we cannot accurately predict the ultimate outcome of the matter. Accordingly, at March 31, 2015, we did not record a contingency related to this matter.

SLFPA-E Litigation – Plaintiff South Louisiana Flood Protection Authority—East (10“SLFPA-E”) ~~STOCKHOLDERS~~ filed this lawsuit in Louisiana state court against over 90 oil and gas and pipeline companies. Generally the lawsuit alleges that activities by defendants—primarily but not exclusively the dredging of canals—have made it more difficult for the SLFPA-E to protect the New Orleans metropolitan area from flooding. The petition alleges that HKN, Inc. is "by virtue of [one or more of] mergers, acquisitions, name changes, etc., responsible for" the actions of Tejas Power Corporation, which is alleged to have obtained in the 1980s certain dredging permits and rights of way. HKN, Inc. disputes that it is responsible for any actions of Tejas Power Corporation. The public record appears to suggest that Tejas Power Corporation may have been a subsidiary of Harken Oil and Gas, Incorporated (a previous name of HKN, Inc.) for a few years in the 1980s and 1990s. However, there appears to be nothing to indicate that HKN, Inc. would have liability for the actions of Tejas Power Corporation, which continued to exist after HKN, Inc. no longer had any interest in Tejas Power Corporation. Defendants removed the case to federal court and the plaintiff filed a motion to remand the case back to state court. On June 27, 2014, the Judge issued an Order denying remand to state court. A status conference was held on August 6, 2014, and the Defendants filed a Joint Motion to Dismiss during September 2014. Oral arguments with respect to this motion were held before the court on November 12, 2014. On February 13, 2015, the court signed an order ruling in favor of the Defendants and dismissing all claims. The court ruled that the SLFPA-E’s ~~EQUITY`~~lawsuit failed to state a viable claim against the Defendants primarily because: (a) the statutes upon which SLFPA-E based its claims (the Rivers and Harbors Act, the Clean Water Act, and the Coastal Zone Management Act) did not create a duty on behalf of the Defendants for the protection or benefit of the SLFPA-E; and (b) the SLFPA-E was not a third party beneficiary to the federal permits received by the Defendants. On February 24, 2015, SLFPA-E filed an appeal of the lower court’s ruling. The appeal is now pending before the United States 5th Circuit Court of Appeals. SLFPA-E’s appeal brief is due on May 20, 2015, and the Defendants’ briefs will be due 30 days from the date on which SLFPA-E files its brief. Accordingly, at March 31, 2015, we did not record a contingency related to this matter.

No changes in the number of preferred shares occurred during the nine months ended September 30, 2014. The changes in the number of common and treasury shares held during the nine months ended September 30, 2014 are as follows:

	Number of Shares
Description		Preferred G1	Preferred G2	Common		Treasury
Balance as of December 31, 2013		1,000	1,000	401,943		—
Shares issued for preferred stock dividends		—	—	2		—
Treasury stock repurchase		—	—	—		11,029
Treasury stock retirements		—	—	(11,029	)	(11,029	)
Balance as of September 30, 2014		1,000	1,000	390,916		—

Louisiana Limited Scope Audit – In April 2012, we received notice from the State of Louisiana’s Department of Revenue that our discontinued oil and gas subsidiary, XPLOR Energy Operating Company, was the subject of a limited scope sales tax audit focused on the company’s on-site use and consumption of lease gas in connection with its lease, gathering and pipeline operations from January 1, 2006 through June 30, 2009. The Louisiana Department of Revenue issued a preliminary assessment, or “Notice of Proposed Tax Due,” preliminarily assessing sales tax of $194 thousand and related penalties and interest of $160 thousand, resulting in a total assessment of $354 thousand. In July 2012, we filed an audit protest with the Louisiana Department of Revenue challenging the preliminary assessment, as we do not agree with the legal basis of the assessment or the methodology in which the taxes were calculated and plan to vigorously defend our position. Due to the inherent uncertainties of the audit protest and preliminary assessment, we cannot accurately predict the ultimate outcome of the matter. Accordingly, at March 31, 2015, we did not record a contingency related to this matter. In the event of a negative outcome, the potential loss related to the audit and preliminary assessment is currently estimated not to exceed $354 thousand.

Treasury Stock – At September 30, 2014 and December 31, 2013, we held no shares of treasury stock. In January 2013, we announced that our Board of Directors authorized the cancellation of our amended September 2005 stock repurchase plan and authorized a new stock repurchase program which allows us to buy back up to 45 thousand shares of our common stock. During the nine months ended September 30, 2014, we purchased and retired (11~~,029~~) RELATED ~~shares~~PARTY ~~of our common stock for approximately $847 thousand. As of September 30, 2014, 582 shares remained available for repurchase under our repurchase program.~~TRANSACTIONS

~~Additional~~We ~~Paid~~continue into ~~Capital~~hold ordinary –shares ~~Additional~~Global, ~~paid~~which inis ~~capital~~a ~~decreased~~related byparty. ~~approximately~~Our ~~$688~~CEO, ~~thousand~~Mikel ~~during~~Faulkner, ~~the~~serves ~~nine~~as ~~month~~Chairman ~~period~~of ~~ended~~Global. ~~September~~See ~~30,~~Note ~~2014~~4 – “Investment ~~primarily~~in ~~due~~Global” tofor ~~the~~additional ~~purchase~~information. ~~and~~We ~~retirement~~had ofno ~~our~~additional ~~common~~related ~~stock~~party ~~partially~~transactions ~~offset~~during bythe ~~BWI~~three ~~stock~~months ~~compensation~~ended March 31, 2015.

(11) EARNINGS (LOSS) PER SHARE

The following table sets forth the computation of basic and diluted loss per share for the three and nine months ended September 30, 2014 and 2013 (in thousands, except per share data):

	Three Months Ended September 30, 2014								Three Months Ended September 30, 2013
	Net Loss Attributed to Common Stock			Weighted- Average Shares		Per Share Loss			Net Loss Attributed to Common Stock			Weighted- Average Shares		Per Share Loss
Basic EPS:
Loss from continuing operations (1)	$	(450	)			$	(1.15	)	$	(296	)			$	(0.74	)
Loss from discontinued operations		(3,300	)				(8.44	)		(69	)				(0.17	)
Net loss attributed to common stock	$	(3,750	)		391	$	(9.59	)	$	(365	)		402	$	(0.91	)
Effect of dilutive securities
Preferred stock (2)		—			—		—			—			—		—
Diluted loss per share	$	(3,750	)		391	$	(9.59	)	$	(365	)		402	$	(0.91	)

	Nine Months Ended September 30, 2014								Nine Months Ended September 30, 2013
	Net Loss Attributed to Common Stock			Weighted- Average Shares		Per Share Loss			Net Loss Attributed to Common Stock			Weighted- Average Shares		Per Share Loss
Basic EPS:
Loss from continuing operations (3)	$	(1,598	)			$	(4.05	)	$	(558	)			$	(1.36	)
Loss from discontinued operations		(3,245	)				(8.23	)		(340	)				(0.83	)
Net loss attributed to common stock	$	(4,843	)		394	$	(12.28	)	$	(898	)		410	$	(2.19	)
Effect of dilutive securities
Preferred stock (4)		—			—		—			—			—		—
Diluted loss per share	$	(4,843	)		394	$	(12.28	)	$	(898	)		410	$	(2.19	)

__________________________

(1) Includes accrual of dividends, net of the gain on dividends paid with common shares, related to preferred stock of $4 thousand for both the three months ended September 30, 2014 and 2013.

(2) Includes 11 shares of our common stock related to our Series G1 preferred and Series G2 preferred stock for the three months ended September 30, 2014 and 2013, respectively. These shares were issuable upon their conversion in the period presented and were excluded from the calculation of diluted earnings per share as their effect would have been antidilutive.

(3) Includes accrual of dividends, net of the gain on dividends paid with common shares, related to preferred stock of $4 thousand for both the nine months ended September 30, 2014 and 2013.

(4) Includes 35 shares of our common stock related to our Series G1 preferred and Series G2 preferred stock for the nine months ended September 30, 2014 and 2013, respectively. These shares were issuable upon their conversion in the period presented and were excluded from the calculation of diluted earnings per share as their effect would have been antidilutive.

(12) CONTINGENCIES

XPLOR Energy Litigation – Pursuant to a Purchase and Sale Agreement (“PSA”) dated as of November 17, 2011 between our subsidiary XPLOR Energy SPV-1, Inc. (“XPLOR”) and Texas Petroleum Investment Company (“TPIC”), XPLOR sold to TPIC its oil and gas production assets and related operations at its Main Pass 35 field. The closing of the transaction occurred on November 17, 2011 but was effective as of October 1, 2011. On November 21, 2011, TPIC informed XPLOR that they had discovered defects in the salt water disposal system at Main Pass resulting in a salt water spill in the Gulf of Mexico, which had been reported to regulatory authorities.

TPIC has filed a lawsuit against XPLOR in the 236th Judicial District Court, Tarrant County, Texas. The case is styled: Texas Petroleum Investment Company vs. XPLOR Energy SPV-1, Inc., Richard Cottle, Sarah Gasch, and John Hewitt. In the lawsuit, TPIC has asserted claims of fraud, fraudulent inducement, negligent misrepresentation, and indemnity related to its purchase of a production platform and associated assets from XPLOR. TPIC’s claims focus on alleged salt water system defects, related repairs to the facilities, and purported representations regarding the condition of the platform and associated assets. TPIC is seeking an unstated amount of alleged actual and exemplary damages as well as costs and fees. Although litigation is inherently uncertain, based upon the information known to date, we do not believe TPIC’s civil, contractual and fraud claims have merit. We intend to vigorously defend any assertions related to the above lawsuit. Accordingly, as of September 30, 2014, we did not record a contingency related to TPIC’s allegations. Based upon information known to date, the range of estimated loss if TPIC were to prevail on its claims is currently estimated not to exceed $2.5 million in damages, costs, and fees.

BWI Contingencies – See Note 2 – “BriteWater International, Inc.” for further discussion of BWI contingencies.

In March 2013, we were advised that the U.S. Environmental Protection Agency (“EPA”) was undertaking a criminal investigation of the salt water disposal incident. In June 2014, we began discussions with the U. S. Attorney’s Office in New Orleans, Louisiana with regard to resolving any potential allegations against XPLOR. On September 15, 2014, the U.S. Attorney’s Office filed a Bill of Information with the U.S. District Court for the Eastern District of Louisiana (the “Court”) alleging that XPLOR knowingly violated The Federal Water Pollution Control Act (the “Clean Water Act”) at its Main Pass operations. Subject to the Court’s acceptance and to avoid the risks, uncertainties, costs and other burdens of litigation, we have agreed with the U. S. Attorney’s Office to submit a plea agreement reflecting a payment of $3.1 million in settlement of one felony count of a knowing violation of the Clean Water Act. The Court has scheduled a plea hearing on this matter for November 19, 2014. Accordingly, as of September 30, 2014, we recorded a $3.1 million contingency within liabilities of discontinued operations in our consolidated condensed balance sheets related to these investigations.

Point Au Fer Lawsuit – During the second quarter 2013, we learned HKN, Inc. was named in a lawsuit filed in the 32nd Judicial District Court for the Parish of Terrebonne, Louisiana by Point Au Fer, L.L.C., and The Roman Catholic Church of the Archdiocese of New Orleans. The case is styled: Point Au Fer, L.L.C., and The Roman Catholic Church of the Archdiocese of New Orleans v. ExxonMobil Oil Corporation, et al, No. 169160. In the lawsuit, the plaintiffs have alleged that real property they own in Terrebonne Parish has been environmentally damaged as a result of oil and gas exploration activities of twenty different defendants. The plaintiffs seek damages for testing and remediation of the property, property stigma, loss of use of land and lost profits, civil fruits for defendants trespass, land loss and subsidence, punitive or exemplary damages and attorney’s fees. Per Louisiana law, no actual dollar amount of damages has been alleged in the Petition. With specific regard to HKN, Inc., out of over one hundred wells identified in the Petition, HKN, Inc. only drilled one well, the MA Smythe Nelson #1, which was a dry hole. The MA Smythe Nelson #1 was drilled on June 2, 1980 and plugged and abandoned on July 12, 1980. We have and intend to continue to vigorously defend any assertions related to the above lawsuit. Due to the inherent uncertainties of the lawsuit at this time, we cannot accurately predict the ultimate outcome of the matter. Accordingly, at September 30, 2014, we did not record a contingency related to this matter.

Point a la Hache Lawsuit – During the second quarter 2013, we learned XPLOR Energy Operating Company and XPLOR Energy SPV-1, Inc. were named in a lawsuit filed in the 25th Judicial District Court for the Parish of Plaquemines, Louisiana. The case is styled: Catherine P. Alford et al. v. BP America Production Company, et al., Docket No. 60-479. In the lawsuit, eight plaintiffs have sued 25 defendants, alleging that they own and/or use a certain 4,480 acres located in the Pointe a la Hache oil and gas field. Plaintiffs further allege that the property has been contaminated or otherwise damaged by oil and gas exploration and production activities. Per Louisiana law, no actual dollar amount of damages has been alleged in the Petition. On March 18, 2014, prior to the hearing on defendants’ exceptions, plaintiffs filed a motion to dismiss the lawsuit in its entirety. The court signed the order dismissing all claims against the defendants on March 27, 2014, and the case is now closed. Accordingly, at September 30, 2014, we did not record a contingency related to this matter.

SLFPA-E Litigation – Plaintiffs South Louisiana Flood Protection Authority—East (“SLFPA-E”) filed this lawsuit in Louisiana state court against over 90 oil and gas and pipeline companies. Generally the lawsuit alleges that activities by defendants—primarily but not exclusively the dredging of canals—have made it more difficult for the SLFPA-E to protect the New Orleans metropolitan area from flooding. Defendants removed the case to federal court and the plaintiff filed a motion to remand the case back to state court. On June 27, 2014, the Judge issued an Order denying remand to state court. A status conference was held on August 6, 2014. At that conference, the Court set a hearing date of November 12, 2014 for all Rule 12(b) defense motions and plaintiffs’ Motion for Partial Summary Judgment. The Court further stated that another status conference will be held two (2) weeks after her ruling on the Motions that are filed. Until that time, there will be no discovery or, other than the motions that have been specifically allowed to be filed, any other activity in the case. The petition alleges that HKN, Inc. is "by virtue of [one or more of] mergers, acquisitions, name changes, etc., responsible for" the actions of Tejas Power Corporation, which is alleged to have obtained in the 1980s certain dredging permits and rights of way. HKN, Inc. disputes that it is responsible for any actions of Tejas Power Corporation. The public record appears to suggest that Tejas Power Corporation may have been a subsidiary of Harken Oil and Gas, Incorporated (a previous name of HKN, Inc.) for a few years in the 1980s and 1990s. However, there appears to be nothing to indicate that HKN, Inc. would have liability for the actions of Tejas Power Corporation, which continued to exist after HKN, Inc. no longer had any interest in Tejas Power Corporation. Due to the inherent uncertainties of the lawsuit at this time, we cannot accurately predict the ultimate outcome of the matter. Accordingly, at September 30, 2014, we did not record a contingency related to this matter.

Louisiana Limited Scope Audit – In April 2012, we received notice from the State of Louisiana’s Department of Revenue that our discontinued oil and gas subsidiary, XPLOR Energy Operating Company, was the subject of a limited scope sales tax audit focused on the company’s on-site use and consumption of lease gas in connection with its lease, gathering and pipeline operations from January 1, 2006 through June 30, 2009. The Louisiana Department of Revenue issued a preliminary assessment, or “Notice of Proposed Tax Due,” preliminarily assessing sales tax of $194 thousand and related penalties and interest of $154 thousand, resulting in a total assessment of $348 thousand. In July 2012, we filed an audit protest with the Louisiana Department of Revenue challenging the preliminary assessment, as we do not agree with the legal basis of the assessment or the methodology in which the taxes were calculated and plan to vigorously defend our position. Due to the inherent uncertainties of the audit protest and preliminary assessment, we cannot accurately predict the ultimate outcome of the matter. Accordingly, at September 30, 2014, we did not record a contingency related to this matter. In the event of a negative outcome, the potential loss related to the audit and preliminary assessment is currently estimated not to exceed $348 thousand.

(13) RELATED PARTY TRANSACTIONS

Our related party transactions at September 30, 2014 include our $7.5 million note receivable from Global. Our CEO, Mikel Faulkner, serves as Chairman of Global. Please see Note 5 - “Notes Receivable – Related Party” for additional information on our note receivable from Global.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion is intended to assist you in understanding our business and the results of our operations. It should be read in conjunction with the consolidated condensed financial statements and the related notes that appear elsewhere in this report as well as our Annual Report on Form 10-K for the year ended December 31, ~~2013~~2014. Certain statements made in our discussion may be forward-looking. Forward-looking statements involve risks and uncertainties and a number of factors could cause actual results or outcomes to differ materially from our expectations. Unless the context requires otherwise, when we refer to “we,” “us” and “our,” we are describing HKN, Inc. and its consolidated subsidiaries on a consolidated basis.

BUSINESS OVERVIEW

Our business strategy is focused on ~~enhancing value for our shareholders through~~ the development of a well-balanced portfolio of assets in the energy industry. Currently, the majority of the value of our assets is derived from our investment in publicly-traded ordinary shares of Global Energy Development PLC (“Global”) and our wholly-owned subsidiaries, BriteWater International, Inc. (“BWI”), ~~and~~ HKN Bakken, Inc. (“HBI”), ~~our investment in publicly-traded ordinary shares of Global Energy~~and ~~Development~~HTH, ~~PLC~~Inc. (“~~Global~~HTH”) ~~and our note receivable extended to Global~~. Our objective in ~~2014~~2015 is to ~~continue~~preserve ~~to build~~ the value of our portfolio of assets during this period of low commodity pricing through:

· ~~Identifying,~~Pursuing ~~developing,~~opportunities ~~operating~~to ~~and~~invest ~~marketing~~in ~~applications~~or ~~for~~acquire distressed assets or companies in the ~~BWI~~energy ~~emulsion-breaking~~industry ~~technology~~which we believe are undervalued,

· ~~Pursuing~~Providing ~~opportunities~~management toexpertise ~~invest in~~ and/or ~~acquire~~additional ~~undervalued~~capital ~~assets~~to orthird ~~companies~~parties into ~~the~~generate ~~energy~~fees ~~industry~~and/or ~~which~~interest weincome ~~believe~~to ~~present~~offset ~~significant~~fixed ~~near-term~~overhead ~~growth potential~~costs,

· ~~Providing~~Identifying, ~~management~~developing, ~~expertise~~operating and~~/or~~ ~~additional~~marketing ~~capital~~applications for ~~our~~the ~~assets~~BWI toemulsion-breaking ~~enhance~~technology ~~their~~within ~~value~~an ~~and~~economic ~~accelerate~~environment ~~growth~~ and

· ~~Managing~~Aggressively pursuing reductions in our discretionary capital expenditures and selling, general and administrative costs.

Management continues to evaluate additional potential projects and opportunities within the energy and related industries.

BriteWater International, Inc.

BWI ~~owns~~holds apatents ~~patented~~for oilfield emulsion breaking technology. This is a continuous process technology that can purify oilfield emulsions by breaking and separating the emulsions into oil, water and solids, thereby reducing the environmental impact and disposal costs of these waste materials while recovering valuable oil. This technology has been successfully tested in multiple refineries as well as in a demonstration in Prudhoe Bay, Alaska, all of which confirmed the effectiveness of the emulsion breaking technology to recover valuable hydrocarbons and reduce wastes. BWI has completed the design, construction and installation of standardized modules which can be used for both upstream and downstream applications in the oil and gas industry, including processing oilfield and refinery emulsions to recover valuable oil and oil spill remediation. BWI’s wholly-owned subsidiary, Arctic Star Alaska, Inc. (“Arctic Star”), has substantially completed commissioning this set of modules as a mobile waste processing plant which is located on the North Slope of Alaska and is currently performing test runs.

BWI’s ~~also has an existing purpose~~wholly-~~built~~owned subsidiary, ~~plant~~Arctic ~~which~~Star ~~was~~Alaska, ~~designed~~Inc. to(“Arctic ~~break~~Star”), ~~emulsions~~has ~~found~~a in1,000 ~~weathered~~barrel ~~lagoon~~per ~~pits.~~day ~~Although~~oilfield ~~its~~waste ~~primary~~processing ~~focus~~plant ~~currently~~located isin toDeadhorse, ~~make~~Alaska. Although the Arctic Star plant ~~operational,~~was ~~BWI~~commissioned ~~will~~and ~~develop~~ready afor ~~business~~use ~~plan~~in tothe ~~deploy~~first ~~this~~quarter 2015, the plant oris currently ~~parts~~not economic due to a low availability of ~~the~~feedstock ~~plant~~and ~~once~~ the ~~Arctic~~recent ~~Star~~steep ~~plant~~decline isin ~~commissioned~~oil prices. As a result, in March 2015 the ~~fourth~~plant ~~quarter~~was ~~2014~~idled. ~~Should~~Although wemanagement ~~determine~~will ~~that~~continue ~~this~~to ~~plant~~monitor marketing conditions, it is ~~not~~currently ~~deployable~~unknown orhow ~~that~~long the ~~only~~plant ~~parts~~will ofremain ~~the~~idle ~~plant~~due ~~are~~to ~~deployable,~~continued weuncertainty ~~could~~in ~~incur~~long-term acrude ~~write~~pricing ~~down~~as ofwell ~~the~~as ~~book~~oilfield ~~value~~drilling ofand ~~this~~development ~~asset~~activities near the plant.

21BWI also has a completed purpose-built plant which was designed to break emulsions found in weathered lagoon pits. We have determined that as a result of current oil pricing and the age of the plant, it is not likely we will be able to deploy and operate the BWI weathered lagoon plant for its intended purpose in the near future.

~~Domestic Energy Investment – HKN Bakken, Inc.~~18

~~HBI~~We ~~currently~~review ~~holds~~our ~~non~~long-~~operated~~lived ~~oil~~assets ~~and~~for ~~gas~~impairment ~~leases~~whenever ~~and~~events ~~mineral~~or ~~interests~~changes in ~~properties~~circumstances ~~strategically~~indicate ~~located~~that in the ~~Bakken~~carrying ~~and~~amount ~~Niobrara~~of ~~shale~~any ~~oil~~asset ~~plays.~~may Wenot ~~invested in~~be ~~these assets because we believe they represent significant near-term growth potential and align well with our long term investment goals~~recoverable. As ~~We plan to continue to strategically invest, on~~ a ~~non-operated basis~~result, inthese ~~all~~BWI ~~phases~~assets ofwere ~~the~~impaired ~~oil~~at ~~and gas business including the acquisition~~ of ~~oil~~December ~~and gas leases~~31, ~~fee~~2014. ~~mineral~~No ~~interests,~~additional ~~overriding~~impairment ~~royalty~~was ~~interests,~~recognized ~~participating~~on ~~and~~these ~~non-participating~~BWI assets ~~royalty~~during ~~interests~~the ~~and~~three ~~production~~months ~~payments,~~ended ~~and~~March ~~participating in the drilling~~31, ~~completion, operation and maintenance of oil and gas wells~~2015.

Domestic Energy Investments – HKN Bakken, Inc. and HTH, Inc.

HBI

HBI currently holds non-operated oil and gas leases and mineral interests in properties strategically located in the Bakken and Niobrara shale oil plays. Due to the impact of decreased oil prices on the ultimate economics of wells in these plays, we assess each drilling opportunity on a case-by-case basis and participate in wells that we expect to meet our return thresholds based upon our estimates of ultimate recoverable crude oil and natural gas, expertise of the operator and completed well cost from each project, as well as other factors. As a result, we plan to participate on a discretionary basis during 2015 and anticipate we will participate in fewer wells than past years.

HTH

Colombian Energy Investment – Global Energy Development PLC

At ~~September 30~~March 31, ~~2014~~2015, we held an investment in Global through our ownership of approximately 35% of Global’s ordinary shares ~~and notes receivable~~. Global is a petroleum exploration and production company focused on Latin America. Global’s shares are traded on the Alternative Investment Market (“AIM”), a market operated by the London Stock Exchange. InAlthough ~~addition to financing opportunities, we continue to monitor our investment in~~ Global ~~in order to identify opportunities for divesting of shares or making additional investments in the company. Global~~’s ~~asset~~share ~~base~~price ~~continues~~decreased toduring bethe ~~strong;~~first quarter ~~therefore~~2015, we intend to hold our shares of Global until we believe the market price more accurately reflects the value of its ~~operations and~~ asset base.

Ordinary Shares - We account for our ownership of Global shares as an available for sale investment. At ~~September~~March 3031, ~~2014~~2015 and December 31, ~~2013~~2014, ~~our~~ our investment in Global was equal to the market value of Global’s ordinary shares as follows (in thousands, except for closing price and exchange rate amounts):

	September 30, 2014		December 31, 2013
Shares of Global Stock Held by HKN		12,805		12,462
Closing Price of Global Stock	£	0.46	£	0.94
Foreign Currency Exchange Rate		1.6220		1.6574
Market Value of Investment in Global	$	9,450	$	19,312

The foreign currency translation adjustment of approximately $137 thousand and the unrealized loss on investment of $10.1 million for the changes in market value between the two periods were recorded to other comprehensive income in stockholders’ equity during the nine months ended September 30, 2014.

	March 31, 2015		December 31, 2014

Shares of Global Stock Held by HKN		12,805		12,805

Closing Price of Global Stock	£	0.40	£	0.50

Foreign Currency Exchange Rate		1.4846		1.5586

Market Value of Investment in Global	$	7,509	$	9,979

~~2013~~The ~~Note~~foreign ~~Receivable~~currency translation -adjustment Inof ~~March~~approximately ~~2013, we entered into a new loan agreement (the “Global 2013 Note”) with Global to refinance the outstanding~~ $5455 ~~million~~thousand ~~Global Note Receivable~~ and the ~~$12~~unrealized ~~million~~loss ~~Global~~on ~~Loan~~investment ~~into~~of ~~one~~ $172 million ~~note.~~for ~~The Global 2013 Note extended~~ the ~~maturity~~ ~~date~~changes ~~to June 15, 2015 and increased the interest rate from 12.5% to 12.75%. Principal payments are required quarterly and began on March 31, 2013. To date, we have received $9.5 million~~ in ~~principal~~market ~~payments~~value ~~from Global. As of September 16, 2014,~~between ~~pursuant to provisions of~~ the ~~Global~~two ~~2013~~periods ~~Note~~were ~~agreement,~~recorded ~~the interest rate charged was increased from 12.75% up~~ to ~~13.5%~~other ~~per~~comprehensive ~~annum due~~income toin ~~Global~~stockholders’s ~~nonconformity~~equity ~~with~~during ~~performance~~the ~~conditions~~three asmonths ofended ~~June~~March 3031, ~~2014. The new stated interest rate will remain in~~ ~~effect until the maturity of the loan agreement~~2015. ~~Accrued interest on the outstanding principal balance is due on each quarterly principal payment date.~~

In October 2014, Global announced it has entered into a conditional share purchase agreement for the disposal of its contract areas within the Llanos Basin. Upon completion of this transaction, the net proceeds will be used, in part, to eliminate this outstanding debt.

RECENT DEVELOPMENTS

~~Current~~Throughout ~~Year~~the ~~Investments~~first three months of 2015, management evaluated the current and projected economic and marketing conditions related to the operation of the Arctic Star plant. Due to limited availability of feedstock and the steep decline in oil prices, management decided to idle the plant until market conditions improve or a more economic location for the plant is identified. The process of placing the Arctic Star plant in cold storage began late in the first quarter and was completed in April 2015.

~~Throughout the first nine~~Investment months of 2014, we continued to focus our resources on the development of our emulsions-breaking technology through the construction, installation and commissioning of the Arctic Star plant, our participation in ~~the~~BWI ~~development of the Bakken and Niobrara shale plays through HBI, and support of our investments in Global.~~

~~Continued~~Arctic Star, BWI’s ~~Investment~~initial project to commercialize its emulsions-breaking technology, completed the commissioning of the 1,000 barrel per day oilfield waste processing plant located in ~~BWI~~Deadhorse, Alaska in January 2015.

~~During~~Although the ~~nine months ended September 30, 2014, we invested approximately $6 million in the~~ Arctic Star plant, ~~BWI’s~~was ~~initial~~ready ~~project~~for touse ~~commercialize its~~in ~~emulsions-breaking technology. During~~ the first quarter ~~2014~~2015, ~~Arctic~~the ~~Star~~plant ~~executed~~is acurrently ~~lease~~not ~~for~~economic adue ~~site in Deadhorse, Alaska~~ to ~~install~~limited ~~and~~availability ~~operate~~of ~~its plant. Construction was completed during the first quarter 2014~~ feedstock and the ~~modules~~steep ~~were~~decline ~~shipped~~in tooil ~~the North~~prices. ~~Slope~~As ~~and~~a ~~installed~~result, ~~during~~in ~~the~~March ~~second~~2015 ~~quarter 2014. Commissioning of~~ the plant was ~~substantially~~idled. ~~completed~~Although inmanagement ~~October~~will ~~2014, with~~continue ~~operations expected~~ to ~~begin~~monitor marketing ~~upon~~conditions, ~~successful~~it ~~completion~~is ofcurrently ~~test~~unknown ~~runs~~how ~~during~~long the ~~fourth~~plant ~~quarter~~will ~~2014.~~remain ~~Arctic~~idle ~~Star~~due ~~currently holds contracts which grant Arctic Star the option~~ to ~~take~~continued ~~title~~uncertainty ~~to oilfield waste generated~~ in ~~certain~~long-term ~~fields on the North Slope at no cost and sell any recovered~~ crude ~~volumes at market prices. The Company continues negotiations to enter into additional feedstock~~ ~~supply~~pricing ~~agreements,~~as ~~one~~well ofas ~~which~~oilfield ~~was~~drilling ~~obtained~~and indevelopment ~~April~~activities ~~2014.~~near ~~Arctic Star also entered into an agreement for~~ the ~~sale of 100% of its product on the North Slope during April 2014~~plant.

~~Additional~~ Investment in Global

~~During~~As ~~the~~of ~~nine~~March ~~months~~31, 2015, we ~~ended~~had ~~September~~a ~~30,~~cumulative ~~2014~~unrealized loss position on our investment in Global. Therefore, we ~~purchased~~assessed anthe ~~additional~~decline ~~343~~in ~~thousand~~market ~~shares~~value ofto ~~Global~~determine whether ~~for~~it ~~approximately~~was ~~$422~~considered ~~thousand,~~a ~~increasing~~temporary or other than temporary impairment. After reviewing Global’s published annual report and considering our ~~ownership~~intent ~~from~~and 34ability to hold the investment, we determined the impairment to be temporary as of March 31, 2015.~~51%~~ However, we will continue to 35evaluate whether this investment is impaired in each subsequent reporting period until either the investment experiences a recovery of fair value up to its cost or the decline is considered to be an other than temporary impairment loss.~~46%.~~

~~Continued~~ Investment in ~~HBI~~Domestic Energy

~~We continue to strategically invest in~~ HBI, on a non-operated basis, in all phases of the oil and gas business, including participation in the drilling, completion, operation and maintenance of oil and gas wells. During the nine months ended September 30, 2014, we invested approximately $209 thousand in drilling and completion costs related to our interests in 72 gross wells in the Bakken. As of September 30, 2014, we held interests in 81 gross Bakken wells and 11 gross Niobrara wells.

23We may choose to strategically invest in HBI, on a non-operated basis, in all phases of the oil and gas business, including participation in the drilling, completion, operation and maintenance of oil and gas wells. During the three months ended March 31, 2015, we had capital expenditures of $79 thousand, of which $68 thousand related to delayed operator billings for two Bakken wells. As of March 31, 2015, we held both mineral and working interests in 89 gross producing Bakken wells and 11 gross producing Niobrara wells.

~~HKN Texas Holdings~~20

We hold rights to acreage in the Permian Basin of Texas related to certain properties which were not conveyed during sales and merger activities of former subsidiaries which were subsequently discontinued or sold. We leased mineral interests for properties in Reeves County, Texas and Pecos County, Texas for development by third parties in October 2013 and March 2014, respectively. We recognized the related lease bonus payments of $121 thousand and $38 thousand, respectively, within interest and other income within our consolidated condensed statement of operations. Both these leases have a three year term and provide for a 25% royalty interest of all production. During the third quarter 2014, one well in Reeves County, Texas began producing, resulting in oil and gas revenues of $93 thousand for the three months ended September 30, 2014. In October 2014, we created a newly formed entity HTH~~, Inc. (“HTH”) and assigned any mineral interest held in Texas to HTH.~~

Other Matters

Share Repurchases

During the ~~nine~~three months ended ~~September~~March 3031, ~~2014,~~2015 we ~~purchased~~did ~~and~~not ~~retired~~repurchase ~~11,029~~any shares of our common stock ~~for approximately $847 thousand~~.

CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS

Our consolidated condensed financial statements have been prepared in accordance with U.S. GAAP which requires us to use estimates and make assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Our estimates and assumptions are based on historical experience, industry conditions and various other factors which we believe are appropriate. Actual results could vary significantly from our estimates and assumptions as additional information becomes known. We have identified the following accounting estimates and assumptions critical to our financial statements:

Investment in Global – We do not account for our investment in Global as an equity method investment in spite of our 35% ownership. We are unable to obtain U.S. GAAP financial statements quarterly to perform equity method accounting due to the semi-annual reporting requirements Global follows under the AIM exchange rules. As a result, we account for Global as an available for sale investment.

We review our investment in Global at least semi-annually and more often if any indicators of impairment become known. We continuously monitor macroeconomic indicators and track Global’s stock price volatility for any downward trends in the market. We also review public financial information including Global’s issued financial statements, investor presentations, as well as financial analysts’ reviews and recommendations for any indicators of an other than temporary impairment in our carrying value. ~~Additionally, we monitor public reports regarding the reserves in Colombia’s Middle Magdalena basin in which Global operates.~~ In addition to these external indicators, we also assess internally our ability and intent to hold our investment in Global should the fair value drop below our cost. Any resulting other than temporary impairment ~~would~~is be immediately recognized in earnings.

As of ~~September~~March 3031, ~~2014~~2015, we we had a cumulative unrealized loss position on our investment in Global of $12.5 million. Therefore, we assessed the decline in ~~market~~ market value to determine whether it was considered a temporary or other than temporary impairment. After reviewing Global’s published annual ~~operational~~report ~~updates~~ and ~~plans and~~ considering our intent and ability to hold the investment, ~~the recent nature of the decline and analyzing the historical price volatility and increases in share price subsequent to this reporting date,~~ we determined the impairment to be temporary as of March ~~September 30~~31, ~~2014~~2015. However, we will continue to evaluate whether this investment is impaired in each subsequent reporting period until either the investment experiences a recovery of fair value up to its cost or the decline is considered to be an other than temporary impairment loss. We have not recognized any impairment losses for the ~~nine~~three months ended ~~September~~ 30March 31, ~~2014~~2015.

2421

Oil and Gas Properties – We use the successful efforts method of accounting for our HKN Bakken, Inc. oil and gas activities. The significant principles for this method are:

· Geological and geophysical evaluation costs are expensed as incurred; · Costs incurred to drill and equip all successful wells are capitalized; · Dry holes for exploratory wells are expensed; · Dry holes for development wells are capitalized; · Capitalized costs related to proved oil and gas property leasehold costs are depleted over total proved oil and gas reserves; and · Capitalized costs related to wells and related equipment and facilities costs are depreciated over proved developed reserves.
Costs incurred to drill and equip all successful wells are capitalized;
Dry holes for exploratory wells are expensed;
Dry holes for development wells are capitalized;
Capitalized costs related to proved oil and gas property leasehold costs are depleted over total proved oil and gas reserves; and
Capitalized costs related to wells and related equipment and facilities costs are depreciated over proved developed reserves.

Estimates of proved oil and gas reserves directly impact financial accounting estimates including depreciation, depletion and amortization expense, evaluation of impairment of properties and the calculation of plugging and abandonment liabilities. Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods and government regulations. The process of estimating quantities of proved reserves is very complex, requiring significant subjective decisions in the evaluation of all geological, engineering and economic data for each reservoir. The data for any reservoir may change substantially over time due to results from operational activity.

Capital amounts attributable to proved oil and gas properties are depleted by the unit-of-production method over proved reserves using the unit conversion ratio for gas of six Mcf of gas to one barrel of oil equivalent (“BOE”), and one barrel of NGLs to one BOE for each geological formation (Bakken and Niobrara).

Our HTH oil and gas activities have no remaining capitalized costs allocated to these properties since these properties are legacy holdings from former subsidiaries that were discontinued or sold.

~~Stock-Based~~Loss ~~Compensation~~ Contingencies – Management Wecontinuously ~~measure~~reviews with legal counsel the status of regulatory matters and pending or threatened litigation. With respect to all ~~stock-based~~significant ~~compensation~~litigation ~~awards~~matters, ~~using~~we consider the likelihood of a ~~fair~~negative ~~value~~outcome. ~~method~~If onwe determine the ~~date~~ likelihood of ~~grant~~a negative outcome is probable and ~~recognize~~the ~~such~~amount ~~expense in~~of ~~our~~the ~~consolidated~~loss ~~condensed~~can be reasonably estimated as of the date of the financial statements, we ~~over~~record ~~the~~an ~~requisite~~estimated ~~service~~loss ~~period~~for onthe aexpected ~~straight-line~~outcome ~~basis.~~of Wethe ~~use~~litigation. If the ~~Black-Scholes~~likelihood of a negative outcome is reasonably possible ~~formula~~and we are able to determine an estimate of the ~~fair~~possible ~~value~~loss or range of ~~stock-based~~loss, ~~compensation~~we ~~awards~~disclose onthat fact together with the ~~date~~estimate of the possible loss or range of ~~grant~~loss. ~~The~~However, ~~Black-Scholes~~it ~~formula~~is ~~requires~~often difficult to predict the outcome or estimate a possible loss or range ~~management~~of loss because litigation is subject to ~~make~~inherent ~~assumptions~~uncertainties, ~~regarding~~particularly when plaintiffs allege substantial or indeterminate damages. Such is also the ~~option~~case ~~lives,~~when ~~expected~~the ~~volatility~~litigation is in its early stages or when the litigation is highly complex or broad in scope. In these cases, ~~forfeiture~~we ~~rate~~disclose ~~and~~that ~~risk~~we ~~free~~are ~~interest~~unable ~~rates~~to predict the outcome or estimate a possible loss or range of loss. We expense legal costs related to such loss contingencies as they are incurred.

RECENT ACCOUNTING PRONOUNCEMENTS

Recently Issued Accounting Pronouncements – InThere ~~April~~are ~~2014,~~currently ~~FASB~~no newly issued ~~the~~accounting ~~Accounting~~pronouncements ~~Standards~~that ~~Update~~are ~~No.~~applicable ~~2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This standard revises the definition of a discontinued operation~~ to ~~limit~~ ~~the~~our ~~circumstances~~business ~~under which a disposal~~ or ~~classification as held for sale qualifies for presentation as a discontinued~~ ~~operation. Amendments in this standard require expanded disclosures concerning a discontinued operation and~~ the ~~disposal of~~presentation ~~an individually-material component~~ of an entity not qualifying as a discontinued operation. The standard is effective for annual and interim periods beginning on or after December 15, 2014 and should be applied prospectively, with early adoption permitted. We currently do not expect this standard to have any impact on our consolidated condensed financial statements.

2522

In May 2014, the FASB issued Accounting Standards Update No. 2014-09 on revenue from contracts with customers. Under this new standard, revenue is recognized at the time a good or service is transferred to a customer for the amount of consideration received for that specific good or service. The standard is effective for interim and annual periods beginning after December 16, 2016, and early adoption is not permitted. Adoption is allowed by either the full retrospective or modified retrospective approach. We are currently evaluating which approach we will apply and the impact, if any, that this standard will have on our consolidated financial statements.

RESULTS OF OPERATIONS

The following is our discussion and analysis of significant components of our operations which have affected our operating results and balance sheet during the three ~~and nine~~ months ended ~~September~~March 3031, ~~2014~~2015 and ~~2013~~2014 included in the accompanying consolidated condensed financial statements.

Results of Continuing Operations for the ~~Quarterly~~ ~~Periods~~Three Months Ended ~~September~~March 3031, ~~2014~~2015 Compared to ~~September~~March 3031, ~~2013~~2014

Our loss from continuing operations increased approximately ~~53%~~$1.6 million from $~~292~~727 thousand in the ~~third~~first quarter ~~2013~~2014 to $~~446~~2.3 ~~thousand~~million in the ~~third~~first quarter ~~2014.~~ 2015. The increase was primarily due to decreased interest income ~~due~~from toour ~~lower~~related ~~outstanding~~party ~~principal~~notes ~~balances~~receivable, onincreased ~~our~~Arctic ~~related~~Star operating ~~party~~expenses, ~~notes receivable~~increased ~~during~~general ~~2014~~and administrative costs and increased depreciation expenses.

~~Oil and Gas~~ Revenues and Operating Expenses

Oil and gas revenues ~~increased~~decreased by $3056 thousand from $~~309~~138 thousand ~~for~~in the ~~third~~first quarter ~~2013~~2014 to $~~339~~82 thousand ~~for~~in the ~~third~~first quarter ~~2014~~2015. The ~~increase~~decrease was due to lower ~~higher~~ oil and gas ~~volumes~~prices, partially offset by ~~lower~~increased oil and gas ~~prices~~volumes. Assuming ~~stable~~current ~~oil~~levels ~~and~~or ~~gas~~continued declines in oil pricing and ~~continued drilling~~the ~~activity~~resulting byanticipated ~~the~~reduction ~~operators~~in drilling activity, future revenues from HBI and HTH are expected to ~~increase~~ decrease as ~~additional~~less ~~wells~~production ~~are~~from ~~drilled~~new ~~and begin~~wells ~~producing~~is added to offset the decline rates of existing wells.

Oil revenues ~~increased~~decreased $2236 thousand to $~~306~~70 thousand and comprised 9085% of our total revenues for the ~~third~~three ~~quarter~~months ~~2014~~ended March 31, 2015. Of this decrease, $85 thousand was related to decreased pricing, partially offset by an increase of $49 thousand as a result of increased volumes. We realized ana 1155% decrease in oil prices received, decreasing from an average of $9778.5352 per barrel in the ~~third~~first quarter ~~2013~~2014 to $8735.1850 per barrel in the ~~third~~ first quarter ~~2014~~2015. Oil production for the ~~third~~first quarter ~~2014~~2015 increased ~~21%~~slightly ~~compared~~from to the ~~prior~~first ~~year~~quarter 2014 ~~period~~ to approximately 42 thousand barrels. ~~This~~Production ~~production~~increases ~~increase~~resulted isfrom ~~primarily~~additional ~~the~~production ~~result~~from of29 ~~recognizing~~new ~~royalties~~Bakken wells and from mineral interests in two wells held by HTH partially offset by the sale of four producing Bakken wells in April 2014 and natural declines. Our non-operated Bakken properties represented 6981% of our oil production for the first quarter 2015.

Gas revenues ~~increased~~decreased $820 thousand to $3312 thousand and comprised 1015% of our total revenues for the ~~third~~three ~~quarter~~months ~~2014~~ended March 31, 2015. Of this decrease, $25 thousand was related to decreased pricing, partially offset by an increase of $5 thousand as a result of increased volumes. We realized ana 867% decrease in gas prices received, decreasing from an average of $69.3122 per mcf in the ~~third~~first quarter ~~2013~~2014 to $53.79 03 per mcf in the ~~third~~first quarter ~~2014~~2015. This average price is higher than the published Henry Hub pricing mainly as a result of natural gas produced in the Bakken formation having a higher dollar value than other natural gas production areas due to its higher wet gas content. ~~Gas~~Production ~~production~~increases ~~for~~resulted ~~the~~from ~~third~~additional ~~quarter~~production ~~2014~~from ~~increased~~29 ~~44%~~new ~~compared~~Bakken towells ~~the prior~~partially ~~year~~offset ~~period~~by tothe ~~approximately~~sale 6of four ~~thousand~~producing ~~mcf.~~Bakken ~~This~~wells ~~production~~in ~~increase~~April is2014 ~~primarily~~and ~~the~~natural ~~result of recognizing royalties from mineral interests in HTH~~declines. Our non-operated ~~Bakken~~ properties located in the Bakken represented 51approximately 68% of our gas production for the first quarter 2015.

26Oil and gas operating expenses increased $6 thousand to $42 thousand for the three months ended March 31, 2015, as a result of expenses related to well repairs and a net increase of 27 wells compared to the 2014 period. Oil and gas operating expenses are expected to remain flat or increase only slightly with the anticipated reduction in the drilling of new wells.

~~Oil~~With ~~and~~the ~~gas operating expenses~~commissioning ~~decreased~~of ~~slightly~~the toArctic ~~$58~~Star ~~thousand~~plant ~~for~~complete in the ~~third~~first quarter ~~2014~~2015, ~~despite~~the anplant ~~increase~~was ofready 24to ~~gross~~begin ~~producing~~processing. ~~wells~~As ~~compared~~a result, costs related to preparing the ~~prior year~~plant ~~period~~for ~~due~~operations towere ano ~~decrease~~longer incapitalized ~~expenses~~and ~~related~~we began to ~~well~~recognize ~~repairs.~~plant ~~Oil~~operating ~~and~~expenses. ~~gas~~Arctic Star plant operating expenses ~~are~~were ~~expected~~$346 thousand for the first quarter 2015 and primarily related to ~~increase~~staffing asand ~~new~~utilities costs as ~~wells~~the ~~are~~plant ~~drilled~~was inreadied ~~the~~for ~~near~~cold ~~term~~storage.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ~~remained~~increased ~~consistent,~~approximately ~~decreasing~~43% ~~slightly~~ from $~~827~~1.2 ~~thousand~~million for the ~~third~~first quarter ~~2013~~2014 to $~~821~~1.7 ~~thousand~~million for the ~~third~~ first quarter ~~2014~~2015 primarily due to increased personnel costs related to one-time severance and termination payments resulting from cost cutting measures. In addition, general and administrative costs related to the Arctic Star plant are no longer capitalized in the current year due to the plant being fully commissioned in January 2015. We anticipate that our selling, general and administrative expenses ~~may~~will ~~increase~~ decrease in future periods as wea ~~dedicate additional~~result ~~resources~~of to the ~~marketing~~approximately ~~efforts~~33% ofreduction ~~BWI~~in ~~and~~the ~~managing~~number ~~operations~~of atemployees ~~Arctic~~and ~~Star.~~as ~~However,~~ we continue to monitor and ~~minimize~~ minimize our controllable costs.

Depreciation, Depletion and Amortization Expense

Depreciation, depletion and amortization expense ~~decreased~~increased approximately 17111% from $~~211~~133 thousand for the ~~third~~first quarter ~~2013~~2014 to $~~176~~280 thousand for the ~~third~~first quarter ~~2014~~2015. ~~The~~This ~~decrease~~increase is primarily due to beginning depreciation of the Arctic Star plant upon its final commissioning in January 2015, partially offset by a lower depletion rate on oil and gas properties ~~resulting~~related ~~from~~to ~~property~~the ~~sales~~lower incost basis resulting from ~~April~~the December 2014 impairment. ~~Depreciation,~~Current ~~depletion~~year depreciation and amortization expenses are ~~expected~~anticipated to ~~increase~~be inhigher than the ~~near~~prior year ~~term~~period as ~~new~~depreciation ~~wells~~on ~~are drilled and begin producing and~~ the Arctic Star plant ~~is placed into service~~continues.

Interest and Other Expenses

Interest and other expenses were $46 thousand for the first quarter 2015, which includes $43 thousand in interest expenses, primarily related to the Arctic Star tank and rig mat capital leases which began in the second quarter 2014, and the loss on sales of assets of $3 thousand.

Interest and Other Income

Interest and other income decreased approximately 3999% from $~~532~~466 thousand in the ~~third~~first quarter ~~2013~~2014 to $~~324~~4 thousand in the ~~third~~first quarter ~~2014~~2015, primarily as a result of ~~lower~~the ~~principal~~early ~~balances~~payoff ~~outstanding~~of on the Global ~~notes~~2013 ~~during~~Note ~~the~~in ~~period~~December 2014.

Loss from Discontinued Operations

Our loss from discontinued operations increased from $6967 thousand in the ~~third~~first quarter ~~2013~~2014 to $~~3.3~~114 ~~million~~thousand in the ~~third~~first quarter ~~2014~~2015. This is primarily a a result of ~~the~~legal ~~$3.1~~costs ~~million contingency recorded during the third quarter 2014 related to the Main Pass Environmental Investigations. In addition,~~ we ~~continued~~continue to incur ~~additional~~for ~~legal costs related to~~ litigation and regulatory matters ~~during the third quarter 2013 and the third quarter 2014~~ related to the oil and gas properties we sold in 2011.

~~Results of Operations for the Nine Months Ended September 30, 2014 Compared to September 30, 2013~~24

Our loss from continuing operations increased approximately 188% from $554 thousand in the first nine months of 2013 to $1.6 million in the first nine months of 2014. The increase was primarily due to decreased interest income from our related party notes receivable and increased general and administrative costs.

Oil and Gas Revenues and Expenses

Oil and gas revenues decreased by $29 thousand from $823 thousand for the first nine months of 2013 to $794 thousand for the first nine months of 2014. The decrease was due to lower oil volumes and decreased oil prices, partially offset by increased gas volumes and higher gas prices. Assuming stable oil and gas pricing and continued drilling activity by the operators, future revenues from HBI and HTH are expected to increase as additional wells are drilled and begin producing to offset decline rates of existing wells.

Oil revenues decreased $64 thousand to $689 thousand and comprised 87% of our total revenues for the nine months ended September 30, 2014. We realized a 7% decrease in oil prices received, decreasing from an average of $93.83 per barrel in the 2013 period to $87.70 per barrel in the 2014 period. Oil production for the nine months ended September 30, 2014 decreased 2% from the prior year period to approximately 8 thousand barrels. Production decreases in the Bakken area resulting from natural decline and significant downtime on one of our top producing wells were nearly offset by additional production from new Bakken wells and from mineral interests in HTH. Our non-operated Bakken properties represented 83% of our oil production for the period.

Gas revenues increased $35 thousand to $105 thousand and comprised 13% of our total revenues for the nine months ended September 30, 2014. We realized an 18% increase in gas prices received, increasing from an average of $6.85 per mcf in the 2013 period to $8.10 per mcf in the 2014 period. This average price is mainly a result of natural gas produced in the Bakken formation having a higher dollar value than other natural gas production areas due to its higher wet gas content. Gas production for the nine months ended September 30, 2014 increased approximately 27% compared to the prior year period to approximately 13 thousand mcf. Increased gas production resulted from newly producing Bakken wells and from mineral interests in HTH partially offset by natural declines. Our non-operated properties located in the Bakken represented approximately 63% of our gas production for the period.

Oil and gas operating expenses increased $44 thousand to $170 thousand for the nine months ended September 30, 2014, as a result of expenses related to well repairs, as well as an increase of 24 gross producing wells compared to the prior year period. Oil and gas operating expenses are expected to increase as new wells are drilled in the near term.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased approximately 14% from $2.5 million for the first nine months of 2013 to $2.8 million for the first nine months of 2014 primarily due to increased personnel and related costs and management and administrative activities related to establishing operations at the Arctic Star Plant. We anticipate that our selling, general and administrative expenses may increase in future periods as we dedicate additional resources to the marketing efforts of BWI management of Arctic Star operations. However, we continue to monitor and minimize our controllable costs.

Depreciation, Depletion and Amortization Expense

Depreciation, depletion and amortization expense decreased approximately 9% from $555 thousand for the first nine months of 2013 to $503 thousand for the first nine months of 2014. This decrease is primarily due to a lower depletion rate on oil and gas properties as a result of property sales in the April 2014. Depreciation, depletion and amortization expenses are expected to increase in the near term as new wells are drilled and begin producing and the Arctic Star plant is placed into service.

Interest and Other Income

Interest and other income decreased approximately 33% from $1.8 million in the first nine months of 2013 to $1.2 million in the first nine months of 2014, primarily as a result of lower principal balances outstanding on the Global notes during the period. Additionally, we recognized $86 thousand in unamortized origination fees related to our old Global notes as a result of entering into our new Global 2013 Note in the first quarter 2013.

Gain on Disposal of Discontinued Operations

We recognized an additional gain on the 2011 disposal of our Gulf Coast oil and gas properties of $41 thousand in the first nine months of 2014 primarily as a result a refund of a drilling prepayment related to retained plugging and abandonment costs. No gain or losses were recognized on this disposal in the first nine months of 2013.

Loss from Discontinued Operations

Our loss from discontinued operations increased from $340 thousand in the first nine months of 2013 to $3.3 million in the first nine months of 2014. This is primarily a result of the $3.1 million contingency recorded during the third quarter 2014 related to the Main Pass Environmental Investigations. In addition, we continue to incur additional legal costs related to litigation and regulatory matters during both the nine months ended September 30, 2014 and 2013 related to the oil and gas properties we sold in 2011.

LIQUIDITY AND CAPITAL STRUCTURE

Financial Condition

	September 30,		December 31,
	March 31,		December 31,
(Thousands of dollars)	~~2014~~2015		~~2013~~2014
Current ratio		3.4634 to 1		53.7617 to 1
Working capital (1)	$	127,~~036~~971	$	1210,~~275~~214
Total debt (2)	$	—	$	—63
Total cash less debt	$	811,~~876~~062	$	14,~~302~~439
Total stockholders' equity	$	4725,~~763~~118	$	6330,~~577~~086
Total liabilities to equity		0.1214 to 1		0.0516 to 1

(1)

Working capital is the difference between current assets and current liabilities.

(2)

Excludes capital lease obligations.

Cash on hand was primarily generated from proceeds from our oil and gas property divestitures and the rights offering to our stockholders, both of which occurred during 2011. These proceeds have been used to develop our BWI and HBI assets as well as to support our Global investment. The ~~slight~~ decrease in our working capital as of ~~September~~March 3031, ~~2014~~2015 as compared to December 31, ~~2013~~2014 is primarily due to ~~cash~~a ~~used by operations of approximately~~ $~~2 million, $6~~3.74 million reduction in ~~capital~~cash balances ~~expenditures~~and ~~for~~a ~~BWI~~$105 ~~and~~thousand ~~HBI,~~decrease ~~the~~in ~~repurchase~~accounts ofreceivable, ~~approximately~~prepaid 11expenses ~~thousand shares~~and ofother ~~treasury~~current ~~stock~~assets, ~~for~~partially ~~approximately~~offset by a $~~847~~547 thousand ~~and~~reduction ~~the~~in ~~purchase~~accounts ofpayable ~~additional~~and ~~Global~~accrued ~~shares~~liabilities, ~~for~~a $~~422~~715 thousand. ~~This~~ decrease ~~was~~ ~~partially~~in ~~offset~~accrued byliabilities ~~increases~~related ~~due~~ to our ~~the~~discontinued ~~reclassification~~operations, ofresulting from the ~~Global~~first ~~2013~~installment ~~Note~~payment ~~receivable~~being tomade ~~current~~on asthe ~~well~~Main asPass ~~$4.5~~Environmental ~~million~~Investigations commitment, and a $40 thousand decrease in ~~principal~~current ~~repayments~~notes ~~received~~payable onand ~~this~~capital ~~Note~~lease obligations.

We ~~used~~anticipate ~~approximately~~our ~~$6.4~~cash ~~million~~balance ~~for~~on ~~capital~~hand ~~expenditures~~will ~~during~~adequately ~~the~~fund ~~first~~our ~~nine~~2015 ~~months~~operating ofcash ~~2014~~flow. ~~for~~We ~~Arctic~~also ~~Star~~anticipate ~~plant~~that ~~construction,~~we ~~installation~~will ~~and~~have ~~commissioning.~~access to other capital Weresources, ~~anticipate~~if itneeded, ~~will~~to ~~cost~~fund aour ~~total~~planned ofcapital ~~approximately~~expenditures ~~$15.5~~and ~~million~~other toinvesting ~~complete~~activities. ~~the~~We ~~construction~~may ~~and~~continue ~~commissioning~~to ofdeploy ~~the~~cash ~~Arctic~~to ~~Star~~acquire ~~plant,~~or ofinvest ~~which~~in ~~approximately~~other ~~$14.2~~energy-related ~~million~~businesses ~~has~~either ~~been~~solely ~~spent~~or ~~through~~with ~~September~~a 30financial partner, ~~2014~~to acquire securities, or for discretionary capital expenditures.

We anticipate our cash balance on hand will adequately fund our 2014 operating cash flow. We also anticipate that we will have access to other capital resources, if needed, to fund our planned capital expenditures and other investing activities.

We may continue to deploy cash to acquire or invest in other energy-related businesses, to acquire securities, or for discretionary capital expenditures. We may also decide to pay dividends to our common shareholders, subject to our ability to pay dividends and to a determination by management and our Board of Directors that dividends are in our best interests and those of our shareholders.

We may also seek to raise financing through the issuance of equity, debt and convertible debt instruments, if needed, for utilization of acquisition, development or investment opportunities as they arise. Additionally, we may reduce our ownership interests in any of our investments through strategic sales under certain conditions.

Capital Structure

At September 30, 2014, if our remaining convertible preferred stock were converted we would be required to issue the following amounts of our common stock:

			Shares of Common
			Stock Issuable at
Instrument	Conversion Price (1)		September 30, 2014
Series G1 Preferred	$	11,200		8
Series G2 Preferred	$	2,688		37
Common Stock Potentially Issued Upon Conversion				45
_______________________ (1) Certain conversion prices are subject to adjustment under certain circumstances.

Significant Ownership of our Stock

As of ~~September~~March 3031, ~~2014~~2015, ~~Everest~~ Everest Hill Group, Inc. (“Everest Hill”) beneficially owned approximately 68% of the combined voting power of our ~~outstanding~~ outstanding common stock. ~~Everest Hill was formerly known as Brean Murray Carret Group, Inc., which changed its name during 2013.~~ This entity is beneficially owned by Wayne Quasha through the AQ, JQ and WQ Trusts. Mr. Alan Quasha, Chairman of the Board of Directors of HKN, is the brother of Wayne Quasha, who is deemed the beneficial owner of Everest Hill, but Mr. Alan Quasha disclaims any beneficial ownership of these shares. Everest Hill is in a position to exercise significant influence over the election of our Board of Directors and other matters.

Cash Flows

Net cash used by operating activities during the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015 was $2.9 million, as compared to $~~880~~1.3 ~~thousand~~million in the prior year period. Net cash used by continuing operations increased from $~~717~~1.3 ~~thousand~~million to $2.2 million. This increase was primarily as a result of a $31.9 6 million increase in ~~net~~cash ~~loss~~adjusted ~~and~~losses anprimarily ~~approximate~~due ~~$609~~to ~~thousand~~increased ~~increase in cash used for~~ operating ~~capital~~costs asand a ~~result~~reduction ofin ~~decreased revenues from our HBI asset, decreased~~ interest income ~~on our Global notes and increases in our general and administrative costs~~, ~~offset~~ offset by ~~the~~an approximate $~~3.1~~677 ~~million~~thousand ~~accrued~~decrease ~~contingency~~in ~~related~~cash toused ~~the~~for ~~Main~~operating ~~Pass Environmental Investigations~~capital. Cash from discontinued operations ~~increased~~ decreased from cash provided ~~used~~ of $~~163~~29 thousand in the prior year period to cash ~~provided~~used of $67715 thousand in the first ~~nine~~three months of 2015. This increase ~~2014~~is a result of the first installment payment being made on the Main Pass Environmental Investigations commitment.

30Net cash used by investing activities during the three months ended March 31, 2015 was $371 thousand, as compared to $843 thousand in the prior year period. Cash used by investing activities for the first three months of 2015 is primarily comprised of $291 thousand in capital expenditures for BWI and $79 thousand in capital expenditures for HBI. Cash used by investing activities during the first three months of 2014 was primarily the result of $2.2 million in capital expenditures for BWI and $33 thousand for HBI, offset by $1.5 million in repayments on the Global 2013 Note.

Net cash used by ~~investing~~financing activities during the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015 was $~~2.5~~154 ~~million~~thousand, as compared to ~~cash provided of~~ $~~133~~319 thousand in the prior year period. Cash used by ~~investing~~financing activities for the first ~~nine~~three months of ~~2014~~2015 is primarily comprised of ~~$6.4~~principal ~~million~~payments ~~in capital~~on ~~expenditures for BWI, $319 thousand in capital expenditures for HBI and $422 thousand for~~ the ~~purchase of shares of Global,~~notes ~~partially~~payable ~~offset by $4.5 million in repayments on the Global 2013 Note~~ and ~~proceeds~~capital oflease ~~$271 thousand from the final dissolution of Gerrity Oil~~obligations. Cash ~~provided~~used by ~~investing~~financing activities during the first ~~nine~~three months of ~~2013~~2014 was ~~primarily~~related to the repurchase ~~result~~ of ~~$3.5~~approximately ~~million in~~4 ~~repayments and the $340~~ thousand ~~origination~~of ~~fee~~our onoutstanding ~~the~~common ~~Global 2013 Note, partially offset by $3~~shares.~~2 million in capital expenditures for BWI and $471 thousand for HBI.~~

We used cash for financing activities of $969 thousand and $3 million during the nine months ended September 30, 2014 and 2013, respectively, primarily to repurchase and retire approximately 11 thousand and 33 thousand, respectively, of our outstanding common shares.

Obligations, Contingencies and Commitments

XPLOR Energy Litigation – Pursuant to a PSA dated as of November 17, 2011 between our subsidiary XPLOR and Texas Petroleum Investment Company (“TPIC”), XPLOR sold to TPIC its oil and gas production assets and related operations at its Main Pass 35 field. The closing of the transaction occurred on November 17, 2011 but was effective as of October 1, 2011. On November 21, 2011, TPIC informed XPLOR that they had discovered defects in the salt water disposal system at Main Pass resulting in a salt water spill in the Gulf of Mexico, which had been reported to regulatory authorities.

TPIC has filed a lawsuit against XPLOR in the 236th Judicial District Court, Tarrant County, Texas. The case is styled: Texas Petroleum Investment Company vs. XPLOR Energy SPV-1, Inc., Richard Cottle, Sarah Gasch, and John Hewitt. In the lawsuit, TPIC has asserted claims of fraud, fraudulent inducement, negligent misrepresentation, and indemnity related to its purchase of a production platform and associated assets from XPLOR. TPIC’s claims focus on alleged salt water system defects, related repairs to the facilities, and purported representations regarding the condition of the platform and associated assets. TPIC is seeking an unstated amount of alleged actual and exemplary damages as well as costs and fees. ~~Although litigation is inherently uncertain, based upon the information known to date, we do not believe TPIC’s civil, contractual and fraud claims have merit.~~ We intend to vigorously defend any assertions related to the above lawsuit. Accordingly, as of ~~September~~March 3031, ~~2014~~2015, we did not record a contingency related to TPIC’s allegations. Based upon information known to date, the range of estimated loss if TPIC were to prevail on its claims is currently estimated not to exceed $2.5 million in damages, costs, and fees.

Main Pass Environmental Investigations – In January 2013, we were notified by the Louisiana Department of Environmental Quality (“LDEQ”) of an investigation and potential penalty related to the TPIC allegations of improper salt water disposal at the Main Pass 35 field previously owned by our subsidiary XPLOR Energy SPV-1, Inc. and previously operated by our subsidiary, XPLOR Energy Operating Company. The matter is styled: In ~~October~~the Matter of Xplor Energy Operating Company, Louisiana Division of Administrative Law Docket No. 2014-2388-EQ, Louisiana Department of Environmental Quality (“LDEQ”) Tracking No. WE-CN-12-01101. In October 2014, a telephone status conference was held with the LDEQ and the Administrative Law Judge (“ALJ”) handling this matter., and ~~Counsel~~the ~~for~~Company ~~XPLOR~~held ~~Energy~~a ~~SPV-1,~~subsequent ~~Inc.~~meeting ~~reported~~at to the ~~ALJ~~ ~~that~~LDEQ offices during November 2014. Following these meetings, the parties ~~had~~ agreed to pursue settlement discussions and ~~requested~~are ~~additional~~currently ~~time~~engaged ~~for~~in ~~settlement~~this ~~discussions~~process. toAt ~~proceed. The~~March ~~ALJ~~31, ~~agreed~~2015, towe ~~pass~~have ~~the~~a ~~matter~~$65 tothousand ~~allow~~contingency within ~~for~~liabilities ~~settlement~~of ~~discussions.~~discontinued ~~The~~operations ~~ALJ~~in ~~set~~our ~~another~~consolidated ~~status~~condensed ~~conference~~balance ~~for~~sheets ~~January~~related ~~2015~~to these investigations.

Point Au Fer Lawsuit – During the second quarter 2013, we learned HKN, Inc. was named in a lawsuit filed in the 32nd Judicial District Court for the Parish of Terrebonne, Louisiana by Point Au Fer, L.L.C., and The Roman Catholic Church of the Archdiocese of New Orleans. The case is styled: Point Au Fer, L.L.C., and The Roman Catholic Church of the Archdiocese of New Orleans v. ExxonMobil Oil Corporation, et al, No. 169160. In the lawsuit, the plaintiffs have alleged that real property they own in Terrebonne Parish has been environmentally damaged as a result of oil and gas exploration activities of twenty different defendants. The plaintiffs seek damages for testing and remediation of the property, property stigma, loss of use of land and lost profits, civil fruits for defendants trespass, land loss and subsidence, punitive or exemplary damages and attorney’s fees. Per Louisiana law, no actual dollar amount of damages has been alleged in the Petition. With specific regard to HKN, Inc., out of over one hundred wells identified in the Petition, HKN, Inc. only drilled one well, the MA Smythe Nelson #1, which was a dry hole. The MA Smythe Nelson #1 was drilled on June 2, 1980 and plugged and abandoned on July 12, 1980. We have and intend to continue to vigorously defend any assertions related to the above lawsuit. Due to the inherent uncertainties of the lawsuit at this time, we cannot accurately predict the ultimate outcome of the matter. Accordingly, at ~~September~~March 3031, ~~2014~~2015, we did not record a contingency related to this matter.

~~Point~~SLFPA-E aLitigation – laPlaintiff ~~Hache~~South ~~Lawsuit –~~Louisiana ~~During~~Flood ~~the~~Protection ~~second~~Authority—East ~~quarter~~(“SLFPA-E”) ~~2013,~~filed wethis ~~learned~~lawsuit ~~XPLOR~~in ~~Energy~~Louisiana state ~~Operating~~court ~~Company~~against over 90 oil and ~~XPLOR~~gas ~~Energy~~and ~~SPV-1,~~pipeline ~~Inc~~companies. Generally ~~were~~the ~~named~~lawsuit inalleges athat activities by defendants—primarily ~~lawsuit~~but ~~filed~~not inexclusively the ~~25th Judicial~~dredging ~~District~~of ~~Court~~canals—have made it more difficult for the ~~Parish~~SLFPA-E ofto ~~Plaquemines,~~protect ~~Louisiana.~~the ~~The~~New ~~case~~Orleans ~~is styled:~~metropolitan ~~Catherine~~area Pfrom flooding. The ~~Alford~~petition etalleges ~~al.~~that vHKN, Inc. BPis ~~America~~"by ~~Production~~virtue ~~Company~~of [one or more of] mergers, etacquisitions, ~~al.~~name changes, ~~Docket~~ Noetc., ~~60-479.~~responsible Infor" the ~~lawsuit,~~actions ~~eight~~of ~~plaintiffs have~~Tejas ~~sued~~Power ~~25 defendants~~Corporation, ~~alleging~~which ~~that~~is ~~they~~alleged ~~own~~to ~~and/or~~have ~~use~~obtained ain the 1980s certain dredging 4permits and rights of way. HKN,~~480~~ ~~acres~~Inc. ~~located~~disputes inthat ~~the~~it ~~Pointe~~is aresponsible lafor ~~Hache~~any ~~oil~~actions ~~and~~of ~~gas~~Tejas ~~field~~Power Corporation. ~~Plaintiffs~~The ~~further~~public ~~allege~~record appears to suggest that ~~the~~Tejas ~~property~~Power ~~has~~Corporation ~~been~~may ~~contaminated~~have orbeen ~~otherwise~~a ~~damaged~~subsidiary byof ~~oil~~Harken Oil and ~~gas~~Gas, ~~exploration~~Incorporated (a previous name of HKN, Inc.) for a few years in the 1980s and ~~production activities~~1990s. ~~Per~~However, ~~Louisiana~~there ~~law~~appears to be nothing to indicate that HKN, noInc. ~~actual~~would ~~dollar~~have ~~amount~~liability for the actions of Tejas ~~damages~~Power ~~has~~Corporation, ~~been~~which ~~alleged~~continued to exist after HKN, Inc. no longer had any interest in ~~the~~Tejas ~~Petition~~Power Corporation. Defendants removed the case to federal court and the plaintiff filed a motion to remand the case back to state court. On ~~March~~June 1827, 2014, ~~prior~~ the Judge issued an Order denying remand to ~~the~~state ~~hearing~~court. A status conference was held on ~~defendants’~~August ~~exceptions~~6, ~~plaintiffs~~2014, and the Defendants filed a ~~motion~~Joint Motion to ~~dismiss~~Dismiss during September 2014. Oral arguments with respect to this motion were held before the ~~lawsuit~~court inon ~~its~~November ~~entirety~~12, 2014. On ~~The~~February 13, 2015, the court signed an order ruling in favor of the ~~order~~Defendants and dismissing all claims. The court ruled that the SLFPA-E’s lawsuit failed to state a viable claim against the ~~defendants~~Defendants onprimarily ~~March~~because: 27(a) the statutes upon which SLFPA-E based its claims (the Rivers and Harbors Act, ~~2014~~the Clean Water Act, and the ~~case~~Coastal Zone Management Act) did not create a duty on behalf of the Defendants for the protection or benefit of the SLFPA-E; and (b) the SLFPA-E was not a third party beneficiary to the federal permits received by the Defendants. On February 24, 2015, SLFPA-E filed an appeal of the lower court’s ruling. The appeal is now ~~closed~~pending before the United States 5th Circuit Court of Appeals. SLFPA-E’s ~~Accordingly~~appeal brief is due on May 20, at2015, ~~September~~and the Defendants’ briefs will be due 30 days from the date on which SLFPA-E files its brief. Accordingly, ~~2014~~at March 31, 2015, we did not record a contingency related to this matter.

32Louisiana Limited Scope Audit – In April 2012, we received notice from the State of Louisiana’s Department of Revenue that our discontinued oil and gas subsidiary, XPLOR Energy Operating Company, was the subject of a limited scope sales tax audit focused on the company’s on-site use and consumption of lease gas in connection with its lease, gathering and pipeline operations from January 1, 2006 through June 30, 2009. The Louisiana Department of Revenue issued a preliminary assessment, or “Notice of Proposed Tax Due,” preliminarily assessing sales tax of $194 thousand and related penalties and interest of $160 thousand, resulting in a total assessment of $354 thousand. In July 2012, we filed an audit protest with the Louisiana Department of Revenue challenging the preliminary assessment, as we do not agree with the legal basis of the assessment or the methodology in which the taxes were calculated and plan to vigorously defend our position. Due to the inherent uncertainties of the audit protest and preliminary assessment, we cannot accurately predict the ultimate outcome of the matter. Accordingly, at March 31, 2015, we did not record a contingency related to this matter. In the event of a negative outcome, the potential loss related to the audit and preliminary assessment is currently estimated not to exceed $354 thousand.

~~Louisiana~~Off-Balance ~~Limited~~Sheet ~~Scope~~Arrangements ~~Audit~~- –As Inpart ~~April 2012, we received notice from the State~~ of ~~Louisiana’s Department of Revenue that~~ our ~~discontinued oil~~ongoing ~~and gas subsidiary~~business, ~~XPLOR~~we ~~Energy~~do ~~Operating~~not ~~Company,~~participate ~~was~~in ~~the~~transactions ~~subject~~that ofgenerate arelationships ~~limited scope sales tax audit focused on the company’s on-site use and consumption of lease gas in connection~~ with ~~its~~unconsolidated ~~lease, gathering and pipeline operations from January 1, 2006 through~~entities ~~June 30, 2009. The Louisiana Department of Revenue issued a preliminary assessment,~~ or ~~“Notice~~financial ~~of Proposed Tax Due~~partnerships,~~” preliminarily~~ ~~assessing~~such ~~sales~~as ~~tax~~entities ofoften ~~$194~~referred ~~thousand~~to ~~and~~as ~~related~~structured ~~penalties~~finance ~~and~~or ~~interest~~special ofpurpose ~~$154~~entities ~~thousand~~("SPEs"), ~~resulting in a total assessment~~ ofwhich ~~$348~~would ~~thousand.~~have Inbeen ~~July~~established ~~2012,~~for ~~we filed an audit protest with~~ the ~~Louisiana~~purpose ~~Department~~ of ~~Revenue~~facilitating ~~challenging~~off-balance ~~the~~sheet ~~preliminary assessment,~~arrangements ~~as we do not agree with the legal basis of the assessment~~ or ~~the~~other ~~methodology~~contractually ~~in which the taxes were calculated and~~narrow ~~plan~~or tolimited ~~vigorously defend our position~~purposes. ~~Due~~As ~~to the inherent uncertainties~~ of ~~the~~March ~~audit protest and preliminary assessment~~31, ~~we cannot accurately predict the ultimate outcome of the matter. Accordingly~~2015, ~~at September 30, 2014,~~ we ~~did~~were not ~~record~~involved ain ~~contingency~~any ~~related to~~unconsolidated ~~this~~SPE ~~matter.~~transactions ~~In the event of a negative outcome, the potential loss related to the audit~~ and ~~preliminary~~we ~~assessment~~have isno ~~currently~~off-balance ~~estimated~~sheet ~~not to exceed $348 thousand~~arrangements.

~~BWI~~Treasury ~~Contingency~~Stock – ~~BWI~~At ~~has~~March a31, ~~contingent~~2015 ~~liability~~and December 31, 2014, we held no shares of ~~$800~~treasury ~~thousand~~stock. ~~related~~In toJanuary an2013, ~~obligation~~we ~~which~~announced ~~may~~that beour ~~payable~~Board ~~upon~~of Directors authorized the ~~conclusion~~cancellation of ~~certain performance~~our ~~events~~September ~~related~~2005 tostock ~~its~~repurchase ~~weathered~~plan ~~lagoon~~and ~~plant.~~authorized ~~There~~a ~~were~~new nostock ~~changes~~repurchase program which allows us to ~~the~~buy ~~BWI~~back ~~liability~~up ~~recorded~~to ~~during~~45 thousand shares of our common stock. During the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015, we did not repurchase any shares of our common stock. As of March 31, 2015, approximately 582 shares remained available for repurchase under our repurchase program.

Off-Balance Sheet Arrangements - As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities ("SPEs"), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of September 30, 2014, we were not involved in any unconsolidated SPE transactions and we have no off-balance sheet arrangements.

Treasury Stock – At September 30, 2014 and December 31, 2013, we held no shares of treasury stock. In January 2013, we announced that our Board of Directors authorized the cancellation of our September 2005 stock repurchase plan and authorized a new stock repurchase program which allows us to buy back up to 45 thousand shares of our common stock. During the nine months ended September 30, 2014, we purchased and retired 11,029 shares of our common stock for approximately $847 thousand. As of September 30, 2014, 582 shares remained available for repurchase under our repurchase program.

Adequacy of Capital Sources and Liquidity

We believe that we will have the ability to provide for our operational needs, ~~our planned capital expenditures~~commitments, estimated contingencies, discretionary capital expenditures and any possible investments through projected operating cash flow and cash on hand. Our operating cash flow has been adversely affected by ~~the~~current ~~sale~~energy ofpricing ~~our oil~~which ~~and~~has ~~gas~~resulted ~~properties,~~in ~~slower~~the ~~than~~idling ~~anticipated development~~ of ~~our~~the ~~HBI~~Arctic ~~oil~~Star ~~and~~plant ~~gas~~for ~~assets~~BWI ~~by their operators,~~ and ~~delays~~lower inthan ~~the~~anticipated ~~construction~~return ~~and~~on ~~commissioning~~our ofHBI ~~the~~oil ~~Arctic~~and ~~Star~~gas ~~project for BWI~~assets. To address this challenge, we continue to minimize our controllable costs ~~and~~until ~~generate~~BWI ~~low-risk~~begins revenue ~~interest~~generation ~~income~~and ~~until~~plan ~~BWI~~to ~~begins~~reduce ~~revenue~~HBI ~~generation~~capital expenditures. We also continue to seek operating assets which will generate cash from operations ~~such as HBI~~. We expect that revenues from HBI will increase sufficiently to offset production declines as the operators further develop the Bakken shale properties, and we anticipate operating revenues from our BWI segment to begin in the fourth quarter 2014. Should projected operating cash flow not materialize, we may reduce ~~BWI~~future ~~capital~~investments, ~~expenditures~~provide management consulting ~~and~~services ~~future~~for ~~investments~~fees, and/or consider the issuance of debt, equity and convertible debt instruments, if needed, for utilization in ~~planned capital expenditures and~~ in new energy-based investment opportunities. All of our HBI and BWI capital expenditures, ~~are~~purchases of Global stock and treasury stock repurchases are purely discretionary and may be curtailed or delayed at any time. We may also reduce our ownership interest in any of our investments through strategic sales.

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Our ~~only~~ debt outstanding at March ~~September 30~~31, ~~2014~~2015 consists of two capital lease obligations for a total of $~~674~~514 thousand. Both of ~~these~~the capital leases carry a minimum two year lease period and include options to renew and/or purchase the leased property. If we seek to raise other equity or debt financing to fund capital expenditures or other acquisition and development opportunities, those transactions may be affected by the market value of our common stock. If the price of our common stock declines, our ability to utilize our stock either directly or indirectly through convertible instruments for raising capital could be negatively affected. Further, raising additional funds by issuing common stock or other types of equity securities could dilute our existing stockholders, and dilution could be substantial if the price of our common stock decreases. Any securities we issue may have rights, preferences and privileges that are senior to our existing equity securities. Borrowing money may also involve pledging some or all of our assets.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its filings with the SEC are recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including its Chief Executive and Chief Financial Officers, as appropriate, to allow timely decisions regarding required disclosure based on the definition of “disclosure controls and procedures” as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As of the end of the period covered by this report, and under the supervision and with the participation of management, including the Company’s Chief Executive Officer and Chief Financial Officer, the Company evaluated the effectiveness of the design and operation of these disclosure controls and procedures. This evaluation was based on the framework in ~~the~~ “Internal Control -– Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in ~~1992~~2013. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.

Changes in Internal Control over Financial Reporting

There have been no significant changes in the Company’s internal control over financial reporting that occurred during the period ended ~~September~~March 3031, ~~2014~~2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(c) The following table provides information about purchases by us during the three months ended ~~September~~March 3031, ~~2014~~2015, of our common stock.

		(a)		(b)		(c)		(d)
Period		Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs		Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs
	July 1, 2014 through July 31, 2014		—	$	—		—		582
	January 1, 2015 through January 31, 2015		—	$	—		—		582
	August 1, 2014 through August 31, 2014		—	$	—		—		582
	February 1, 2015 through February 28, 2015		—	$	—		—		582
	September 1, 2014 through September 30, 2014		—	$	—		—		582
	March 1, 2015 through March 31, 2015		—	$	—		—		582
	Total		—	$	—		—		582

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Item 6. Exhibits

EXHIBIT INDEX

Exhibit

*31.1	Certificate of the Chief Executive Officer of HKN, Inc. pursuant to section 302 of the Sarbanes-Oxley Act of 2002 (“S.O. Act”)

*31.2	Certificate of the Chief Financial Officer of HKN, Inc. pursuant to section 302 of the S.O. Act

*32.1	Certificate of the Chief Executive Officer of HKN, Inc. pursuant to section 906 of the S.O. Act

*32.2	Certificate of the Chief Financial Officer of HKN, Inc. pursuant to section 906 of the S.O. Act

101.INS*	XBRL Instance

101.SCH*	XBRL Taxonomy Extension Schema

101.CAL*	XBRL Taxonomy Extension Calculation

101.DEF*	XBRL Taxonomy Extension Definition

101.LAB*	XBRL Taxonomy Extension Labels

101.PRE*	XBRL Taxonomy Extension Presentation

* Filed herewith

** XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

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HKN, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	HKN, Inc.
	(Registrant)
Date: November 12, 2014	By: /s/ Kristina M. Humphries
Date: May 13, 2015	By: /s/ Kristina M. Humphries
	Kristina M. Humphries
	Vice President and Chief Financial Officer

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