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Document and Entity Information
6 Months Ended
Dec. 31, 2012
Feb. 01, 2013
Document And Entity Information [Abstract]
Document Type 10-Q
Document Period End Date Dec 31, 2012
Amendment Flag false
Document Fiscal Period Focus Q2
Document Fiscal Year Focus 2013
Current Fiscal Year End Date --06-30
Entity Central Index Key 0000061398
Entity Current Reporting Status Yes
Entity Filer Category Smaller Reporting Company
Entity Registrant Name MAGELLAN PETROLEUM CORP /DE/
Entity Voluntary Filers No
Entity Well-known Seasoned Issuer Yes
Entity Common Stock Shares Outstanding 44,642,983
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Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Jun. 30, 2012
Current Assets:
Cash and cash equivalents $ 31,704 $ 41,215
Accounts receivable — trade 884 1,152
Accounts receivable — working interest partners and other 203 231
Inventories 506 499
Prepaid assets 462 511
Total current assets 33,759 43,608
Property and equipment, net (succesful efforts method):
Proved oil and gas properties 33,538 33,927
Less accumulated depletion, depreciation and amortization (5,669) (5,740)
Unproved oil and gas properties 6,620 7,091
Wells in progress 4,210 3,744
Land, buildings, and equipment (net of accumulated depreciation of $2,173 and $2,077 as of December 31, 2012, and June 30, 2012, respectively) 1,583 1,422
Net property and equipment 40,282 40,444
Other Non-current Assets:
Goodwill 2,174 2,174
Deferred income taxes 6,609 5,951
Other long term assets 376 397
Total other non-current assets 9,159 8,522
Total assets 83,200 92,574
Current liabilities:
Short term line of credit 185 50
Current portion of note payable 432 480
Current portion of asset retirement obligations 339 329
Accounts payable 5,207 3,672
Accrued and other liabilities 3,246 3,000
Total current liabilities 9,409 7,531
Long term liabilities:
Note payable 174 390
Asset retirement obligations 7,454 7,455
Contingent consideration payable 4,233 4,072
Other long term liabilities 206 218
Total long term liabilities 12,067 12,135
Equity:
Common stock (par value $0.01 per share): Authorized 300,000,000 shares, outstanding, 54,057,159 and 53,835,594 as of December 31, 2012, and June 30, 2012, respectively 540 538
Preferred stock (par value $0.01 per share): Authorized 50,000,000 shares, outstanding, 0 as of December 31, 2012, and June 30, 2012, respectively 0 0
Treasury stock (at cost): 149,539 and 0 shares as of December 31, 2012, and June 30, 2012, respectively (137) 0
Capital in excess of par value 91,357 90,753
Accumulated deficit (42,184) (29,590)
Accumulated other comprehensive income 12,148 11,207
Total equity attributable to Magellan Petroleum Corporation 61,724 72,908
Total equity 61,724 72,908
Total liabilities and equity $ 83,200 $ 92,574
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Consolidated Balance Sheets (Parentheticals) (USD $)
In Thousands, except Share data, unless otherwise specified
6 Months Ended 12 Months Ended
Dec. 31, 2012
Jun. 30, 2012
Allowance for doubtful accounts $ 0 $ 0
Accumulated depreciation $ 2,173 $ 2,077
Common stock, par value $ 0.01 $ 0.01
Common stock, authorized 300,000,000 300,000,000
Common stock, outstanding 54,057,159 53,835,594
Preferred stock, par value $ 0.01 $ 0.01
Preferred Stock, authorized 50,000,000 50,000,000
Preferred stock, outstanding 0 0
Treasury Stock, Shares, Acquired 149,539 0
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Consolidated Statement of Operations (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
REVENUES:
Oil production $ 1,442 $ 2,701 $ 2,902 $ 5,996
Gas production 306 501 507 942
Total revenues 1,748 3,202 3,409 6,938
OPERATING EXPENSES:
Lease operating 1,665 3,259 3,716 6,277
Depletion, depreciation, amortization, and accretion 332 366 649 841
Exploration 4,094 1,006 4,716 1,994
General and administrative 3,394 3,347 7,057 5,858
Impairment 0 0 890 0
Gain on sale of assets 0 98 0 (4,010)
Total operating (income) expense 9,485 8,076 17,028 10,960
Income (loss) from operations (7,737) (4,874) (13,619) (4,022)
Other income (expense)
Net interest income 258 119 479 390
Other income (127) 0 (112) 0
Total other income (expense) 131 119 367 390
Income (loss) before income tax (7,606) (4,755) (13,252) (3,632)
Income tax benefit (provision) 321 198 658 0
Net income (loss) after income tax (7,285) (4,557) (12,594) (3,632)
Net loss attributable to non-controlling interest in subsidiaries 0 0 0 (15)
Net income (loss) attributable to Magellan Petroleum Corporation $ (7,285) $ (4,557) $ (12,594) $ (3,617)
Earnings per common share (Note 8):
Weighted average number of basic shares outstanding (in shares) 53,860,337 53,835,594 53,854,759 53,378,216
Weighted average number of diluted shares outstanding (in shares) 53,860,337 53,835,594 53,854,759 53,378,216
Net income (loss) per basic share outstanding (dollars per share) $ (0.14) $ (0.08) $ (0.23) $ (0.07)
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Consolidated Statements of Comprehensive Income (Loss) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest $ (7,285) $ (4,557) $ (12,594) $ (3,632)
Foreign currency translation adjustments 22 513 963 (729)
Unrealized holding (losses) gains on securities available for sale, net of deferred tax of $0 0 (57) (22) (91)
Total comprehensive income (loss) (7,263) (4,101) (11,653) (4,452)
Net loss attributable to non-controlling interest in subsidiary 0 0 0 15
Comprehensive income (loss) attributable to Magellan Petroleum Corporation (7,263) (4,101) (11,653) (4,437)
Accumulated Other Comprehensive Income (Loss)
Foreign currency translation adjustments 963
Unrealized holding (losses) gains on securities available for sale, net of deferred tax of $0 $ (22)
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Consolidated Statements of Comprehensive Income (Loss) (Parentheticals) (USD $)
6 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Statement of Other Comprehensive Income [Abstract]
Unrealized holding (losses) gains on securities available for sale, tax $ 0 $ 0
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Consolidated Statement of Stockholders' Equity (USD $)
In Thousands, unless otherwise specified
Total
Common Stock
Treasury Stock
Capital in Excess of Par Value
Accumulated Deficit
Accumulated Other Comprehensive Income
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest at Jun. 30, 2012 $ 72,908 $ 538 $ 90,753 $ (29,590) $ 11,207
Net income (loss) attributable to Magellan Petroleum Corporation (12,594) (12,594)
Foreign currency translation adjustments 963 963
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Unrealized holding gain (loss) on securities available for sale, net of taxes (22) (22)
Stock and stock based compensation 606 2 604
Treasury Stock, Value, Acquired, Cost Method (137) (137)
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest at Dec. 31, 2012 $ 61,724 $ 540 $ (137) $ 91,357 $ (42,184) $ 12,148
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Consolidated Statement of Stockholders' Equity Consolidated Statements of Equity (Parentheticals)
6 Months Ended 12 Months Ended
Dec. 31, 2012
Jun. 30, 2012
Statement of Stockholders' Equity [Abstract]
Treasury Stock, Shares, Acquired 149,539 0
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Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
6 Months Ended 14 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2012
OPERATING ACTIVITIES:
Net income (loss) after income tax $ (12,594) $ (3,632)
Adjustments to reconcile net loss to net cash used in operating activities
Foreign transaction (gain) loss 36 (942)
Depletion, depreciation and amortization 649 841
Interest earned on restricted deposits 0 (24)
Fair value increase of contingent consideration payable 161 81
Deferred income taxes (658) 0
Gain on disposal of assets 0 (4,010)
Stock based compensation 606 886
Impairment loss 890 0
Severance Costs 755 0
Net changes in operating assets and liabilities:
Accounts receivable 305 1,757
Inventories (42) (796)
Prepayments and other current assets 6 (163)
Accounts payable and accrued liabilities 886 (1,894)
Other long term liabilities (14) (17)
Income taxes payable 0 61
Net cash (used in) provided by operating activities (9,014) (7,852)
INVESTING ACTIVITIES:
Additions to property and equipment (1,070) (3,213)
Proceeds from sale of assets 0 5,001
Purchase of working interest in Poplar 0 (823)
Refund (Payment) of Deposit for Purchase of Evans shoal (includes interest) 0 10,940
Securities purchased 0 (2,600)
Net cash provided by (used in) investing activities (1,070) 9,305
FINANCING ACTIVITIES:
Proceeds from issuance of stock 0 35
Payments for Repurchase of Common Stock (137) 0 (137)
Short term debt issuances 1,450 3,800
Short term debt repayments (1,315) (3,026)
Purchase of non-controlling interest - Nautilus Poplar LLC 0 (3,461)
Long term debt repayments (264) (288)
Net cash (used in) provided by financing activities (266) (2,940)
Effect of exchange rate changes on cash and cash equivalents 839 (106)
Net increase (decrease) in cash and cash equivalents (9,511) (1,593)
Cash and cash equivalents at beginning of period 41,215 20,417
CASH AND CASH EQUIVALENTS AT END OF PERIOD 31,704 18,824 31,704
Cash Payments:
Income taxes 0 26
Interest Paid, net of amount capitalized 27 56
Supplemental Schedule of Noncash Investing and Financing Activities:
Unrealized holding gain (loss) (22) (91)
Revision to estimate of asset retirement obligations (306) 0 (306)
Asset Retirement Obligation, Liabilities Incurred 3
Accounts payable related to property plant and equipment 109 918
Purchase of non-controlling interest for Stock and contingent consideration 0 4,729
Purchase of 3% working interest for stock and contingent consideration $ 0 $ 1,243
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Basis of Presentation
6 Months Ended
Dec. 31, 2012
Basis Of Presentation And Significant Accounting Policies [Abstract]
Basis Of Presentation
Note 1 - Basis of Presentation
Description of Operations
Magellan Petroleum Corporation (the "Company" or "Magellan" or "we" or "us") is an independent oil and gas company engaged in the exploration, development, production, and sale of crude oil and natural gas. As of December 31, 2012, Magellan had two reporting segments: (i) a 100% membership interest in Nautilus Poplar LLC ("NP"), a company based in Denver, Colorado, and (ii) a 100% equity interest in its subsidiary, Magellan Petroleum Australia Limited ("MPAL"), a company headquartered in Brisbane, Australia, which includes our operations in the United Kingdom.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of Magellan and its wholly owned subsidiaries, NP and MPAL, and have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and in accordance with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete annual period financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature. All intercompany transactions have been eliminated. Operating results for the six months ended December 31, 2012, are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2013. This report should be read in conjunction with the consolidated financial statements and footnotes included in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2012.
All amounts presented are in United States dollars, unless otherwise noted. Amounts expressed in Australian currency are indicated as "AUD."
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of oil and gas reserves, assets and liabilities, disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Foreign Currency Translation
The functional currencies of our foreign subsidiaries are their local currencies. Assets and liabilities of foreign subsidiaries are translated to United States dollars at period-end exchange rates, and our unaudited condensed consolidated statements of operations and cash flows are translated at average exchange rates during the period. Resulting translation adjustments are recorded as a separate component of stockholders' equity as accumulated other comprehensive income or loss.
Transactions denominated in currencies other than the local currency are recorded based on exchange rates at the time such transactions occurred. Subsequent changes in exchange rates result in foreign currency transaction gains and losses that are reflected in results of operations as unrealized (based on period end translation) or realized (upon settlement of the transactions) and reported under general and administrative expenses in the unaudited condensed consolidated statements of operations.
Goodwill
Goodwill represents the excess of the purchase price over the estimated fair value of the assets acquired net of the fair value of liabilities assumed in an acquisition. GAAP requires goodwill to be evaluated on an annual basis for impairment, or more frequently if events occur or circumstances change that could potentially result in impairment. We adopted the new guidance for our annual impairment test in fiscal year 2012 as allowed by Accounting Standards Update 2011-08 and therefore perform an annual assessment of qualitative factors for our impairment test. The qualitative factors used in our assessment include macroeconomic conditions, industry and market conditions, cost factors, and overall financial performance. For the six months ended December 31, 2012, there were no events or circumstances that would indicate that a goodwill impairment has occurred.
Business Combinations
The Company applies the acquisition method of recording business combinations. Under this method, the Company recognizes and measures the identifiable assets acquired from, the liabilities assumed from, and any non-controlling interest in the acquiree. Any goodwill or gain is identified and recorded. We engage independent valuation consultants to assist us in determining the fair values of crude oil and natural gas properties acquired, and other third party specialists as needed to assist us in assessing the fair value of other assets and liabilities assumed. These valuations require management to make significant estimates and assumptions, especially with respect to the oil and gas properties.
Treasury Stock
On September 24, 2012, the Company announced that its Board of Directors had approved a stock repurchase program authorizing the Company to repurchase up to a total value of $2.0 million in shares of its common stock. The size and timing of such purchases will be based on market and business conditions as well as other factors. The Company is not obligated to purchase any shares of its common stock. The authorization will expire on August 21, 2014, and purchases under the program can be discontinued at any time.
From the inception of the program through December 31, 2012, we purchased 149,539 shares of our common stock for $137 thousand, or an average price of $0.916 per share. These shares are currently being held in treasury at cost.
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Acquisitions and Divestitures
6 Months Ended
Dec. 31, 2012
Acquisitions and Divestitures [Abstract]
Mergers, Acquisitions and Dispositions Disclosures [Text Block]
Note 2 - Acquisitions and Divestitures
Sale Agreement between Magellan Petroleum (N.T.) Pty Ltd and Santos QNT Pty Ltd and Santos Limited. On May 25, 2012, Magellan Petroleum (N.T.) Pty Ltd ("Magellan NT"), a wholly owned subsidiary of MPAL, and Santos QNT Pty Ltd ("Santos") and Santos Limited (collectively the "Santos Entities") completed a Sale Agreement (the "Santos SA"). Under the Santos SA, MPAL became the sole owner of the Palm Valley Interests (as defined below) and the Dingo Interests (as defined below), and Santos became the sole owner of the Mereenie Interests (as defined below). The Santos SA is deemed to be effective as of July 1, 2011, and resulted in net cash proceeds of $26.6 million, including adjustments of $1.1 million, and a gain on sale of assets in the amount of $36.2 million. The Santos SA provided for the transfer of the following assets:
Magellan NT's 35% interest in each of the Mereenie Oil and Gas Field Joint Venture and the Mereenie Pipeline Joint Venture (collectively, the "Mereenie Interests") to Santos;
the Santos Entities' combined interests of 48% in the Palm Valley Joint Venture ("Palm Valley Interests") and combined interests of 66% in the Dingo Joint Venture ("Dingo Interests") to Magellan NT.
Pursuant to the Santos SA, Magellan NT is also entitled to a series of payments of up to AUD $17.5 million provided that certain volume contingencies are met. The Company has not recognized a contingent asset related to these payments, because these payments are not reasonably assured. The Company accounted for the Santos SA using the relative fair value method of accounting, which allocates the fair value of the assets received in the asset transfer to the Palm Valley Interests and the Dingo Interests. No goodwill or other intangible assets were recorded as a result of the Santos SA. However, goodwill in the amount of $2.5 million was recorded as a component of the gain on sale of assets. The purchase price allocation was considered final as of June 30, 2012.
The following table summarizes the allocation of the consideration received for the assets transferred as a result of the Santos SA as of June 30, 2012.
 
Total
 
(In thousands)
Consideration received
 
Net purchase price per Santos SA
$
25,493

Purchase price adjustments
1,138

Total
$
26,631

 
 
Allocation of the consideration received to fair value of assets
 
Proved oil and gas properties (Palm Valley)
$
3,403

Unproved oil and gas properties (Dingo)
2,957

Land, buildings, and equipment (Palm Valley)
370

Total allocation of the fair value received
6,730

Mereenie liabilities given up, net
2,805

Gain on sale of assets
(36,166
)
Total
$
(26,631
)
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Debt
6 Months Ended
Dec. 31, 2012
Debt Disclosure [Abstract]
Debt
Note 3 - Debt
Long term debt relates to a $1.7 million note payable re-issued in January 2011 (the "Note Payable"). The Note Payable will be fully amortized in June 2014. The outstanding principal as of December 31, 2012, and June 30, 2012, consisted of the following:
 
December 31,
2012
 
June 30,
2012
 
(In thousands)
Note payable
$
606

 
$
870

Less current portion of note payable
(432
)
 
(480
)
Long term debt, excluding current portion
$
174

 
$
390


As of December 31, 2012, the minimum future principal maturities of long term debt were as follows:
 
December 31,
2012
 
(In thousands)
One year
$
432

Two years
174

Total
$
606


The variable rate of the note is based upon the Wall Street Journal Prime Rate (the "Index") plus 1.00%, subject to a floor rate of 6.25%. The Index was 3.25% at December 31, 2012, resulting in an interest rate of 6.25% per annum as of December 31, 2012. Under the Note Payable, NP is subject to certain customary financial and restrictive covenants. As of December 31, 2012, NP was in compliance with all financial and restrictive covenants.
In addition, the Company has a $1.0 million working capital line of credit classified as short term debt (the "Line of Credit"). The amount due on the Line of Credit was $0.2 million as of December 31, 2012. The Line of Credit bears interest at a variable rate, which was 6.25% as of December 31, 2012. This Line of Credit also secures (i) a letter of credit in the amount of $25 thousand in favor of the Bureau of Land Management and (ii) business credit cards in the amount of $25 thousand. As of December 31, 2012, $0.8 million was available under this Line of Credit.
The Note Payable and Line of Credit is collateralized by a first mortgage and an assignment of production from Poplar and are guaranteed by Magellan up to $6.0 million, not to exceed the amount of the principal owed. The carrying amount of the Company's long term debt approximates its fair value, due to its variable interest rate, which resets based on the market rates.
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Asset Retirement Obligations
6 Months Ended
Dec. 31, 2012
Asset Retirement Obligation Disclosure [Abstract]
Asset Retirement Obligations
Note 4 - Asset Retirement Obligations
The estimated valuation of asset retirement obligations ("AROs") are based on management's historical experience and best estimate of plugging and abandonment costs by field. Assumptions and judgments made by management when assessing an ARO include: (i) the existence of a legal obligation; (ii) estimated probabilities, amounts, and timing of settlements; (iii) the credit-adjusted risk-free rate to be used; and (iv) inflation rates. Accretion expense is recorded under depletion, depreciation, amortization, and accretion in the unaudited condensed consolidated statement of operations.
The following table summarizes the asset retirement obligation activity for the six months ended December 31, 2012:
 
Total
 
(In thousands)
June 30, 2012
$
7,784

Liabilities assumed
3

Accretion expense
223

Revision to estimate
(306
)
Effect of exchange rate changes
89

December 31, 2012
7,793

Less current asset retirement obligation
339

Long term asset retirement obligation
$
7,454

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Fair Value Measurements
6 Months Ended
Dec. 31, 2012
Fair Value Disclosures [Abstract]
Fair Value Measurements
Note 5 - Fair Value Measurements
The Company follows authoritative guidance related to fair value measurement and disclosure, which establishes a three level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy categorizes assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:
Level 1: Quoted prices in active markets for identical assets – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2: Significant other observable inputs – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3: Significant unobservable inputs – inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The Company's policy is to recognize transfers in and/or out of a fair value hierarchy as of the end of the reporting period for which the event or change in circumstances caused the transfer. The Company has consistently applied the valuation techniques discussed for all periods presented. During the six months ended December 31, 2012, and 2011, there have been no transfers in and/or out of Level 1, Level 2, or Level 3.
Items required to be measured at fair value on a non-recurring basis include liabilities related to AROs. Items required to be measured at fair value on a recurring basis include cash and cash equivalents and securities available for sale, classified as Level 1, and the contingent consideration payable related to the acquisition of the non-controlling interest and additional working interest in NP, classified as Level 3.
As of December 31, 2012, the Company had $31.7 million in cash and cash equivalents, with $1.6 million held in cash and $30.1 million classified as cash equivalents. Cash equivalents have maturities of 90 days or less. In the United States cash equivalents were held in U.S. Treasury notes and in Australia cash equivalents were held in several time deposit accounts.
The following table presents the amounts of assets and liabilities carried at fair value by the level in which they are classified within the valuation hierarchy for the six months ended:
 
December 31, 2012
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(In thousands)
Assets
 
 
 
 
 
 
 
Cash and cash equivalents
$
31,704

 
$

 
$

 
$
31,704

Securities available for sale (1)
133

 

 

 
133

 
$
31,837

 
$

 
$

 
$
31,837

Liabilities
 
 
 
 
 
 
 
Contingent consideration payable
$

 
$

 
$
4,233

 
$
4,233

 
 
 
 
 
 
 
 
 
June 30, 2012
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(In thousands)
Assets
 
 
 
 
 
 
 
Cash and cash equivalents
$
41,215

 
$

 
$

 
$
41,215

Securities available for sale (1)
155

 

 

 
155

 
$
41,370

 
$

 
$

 
$
41,370

Liabilities
 
 
 
 
 
 
 
Contingent consideration payable
$

 
$

 
$
4,072

 
$
4,072

(1) Included in the unaudited condensed consolidated balance sheets under prepaid and other assets.
The following table presents a roll forward of liabilities measured at fair value using significant unobservable inputs (Level 3) for the six months ended December 31, 2012:
 
Total
 
(In thousands)
June 30, 2012
$
4,072

Accretion of contingent consideration payable
161

December 31, 2012
$
4,233


The fair value of the contingent consideration payable is calculated using production projections and the estimated timing of production payouts. The Company also utilizes a discount rate that is consistent with the rate used in valuing its asset retirement obligations and reflective of the Company’s credit adjusted borrowing rate.
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Income Taxes
6 Months Ended
Dec. 31, 2012
Income Tax Disclosure [Abstract]
Income Taxes
Note 6 - Income Taxes
The Company has estimated the applicable effective tax rate expected for the full fiscal year. The Company's effective tax rate used to estimate income taxes on a current year-to-date basis for the six months ended December 31, 2012, is 4.96% compared to 0% for the six months ended December 31, 2011. Deferred tax assets ("DTAs") are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities and for operating losses and tax credit carry forwards. A valuation allowance reduces DTAs to the estimated realizable value, which is the amount of DTA management believes is "more-likely-than-not" to be realized in future periods.
We review our DTAs and valuation allowance on a quarterly basis. As part of our review, we consider positive and negative evidence, including cumulative results in recent years. We anticipate we will continue to record a valuation allowance against our DTAs in all jurisdictions of the Company, except for the DTA related to the Australian Petroleum Resource Rent Tax, until such time as we are able to determine it is "more-likely-than-not" those DTAs will be realized.
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Stock Based Compensation
6 Months Ended
Dec. 31, 2012
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock Based Compensation
Note 7 - Stock Based Compensation
The 2012 Stock Incentive Plan
On January 16, 2013, the Company's shareholders approved the Magellan Petroleum Corporation 2012 Omnibus Incentive Compensation Plan (the "2012 Stock Incentive Plan"). The 2012 Stock Incentive Plan replaces the Company's 1998 Stock Incentive Plan (the "1998 Stock Plan"). The 2012 Stock Incentive Plan provides for the granting of stock options, stock appreciation rights, restricted stock and/or restricted stock units, performance shares and/or performance units, incentive awards, cash awards, and other stock based awards to employees, including officers, directors, and consultants of the Company (or subsidiaries of the Company) who are selected by the Compensation, Nominating and Governance Committee of the Board of Directors of the Company to receive incentive compensation awards. The stated maximum number of shares of the Company's common stock authorized for awards under the 2012 Stock Incentive Plan is 5,000,000 shares plus any remaining shares under the 1998 Stock Plan immediately before the effective date of the 2012 Stock Incentive Plan, which was 288,435 as of January 15, 2013. The maximum aggregate annual number of common shares or options that may be granted to one participant is 1,000,000, and the maximum annual number of performance shares, performance units, restricted stock or restricted stock units is 500,000. The maximum term of the 2012 Stock Incentive Plan is ten years.
Stock Option Grants
Under the 2012 Stock Incentive Plan stock option grants may contain both time based and performance based vesting provisions. The time based options are expensed on a straight-line basis over the vesting period. Performance based options ("PBOs") are recognized when the achievement of the performance conditions is considered probable. Accordingly, the Company recognize expense on these awards over the period of time the performance condition is expected to be achieved. Management re-assesses whether achievement of performance conditions is probable at the end of each reporting period. If changes in the estimated outcome of the performance conditions affect the quantity of the awards expected to vest, the cumulative effect of the change is recognized in the period of change. As of December 31, 2012, there were no outstanding PBOs.
As of January 16, 2013, 5,288,435 shares were available for future issuance under the 2012 Stock Incentive Plan. During the six months ended December 31, 2012, 1,007,500 options were granted of which 75,000 were issued as PBOs and 882,500 options were issued outside of the 1998 Stock Plan. Options outstanding have expiration dates ranging from November 28, 2015, through December 4, 2022.
The following table summarizes the stock option activity for the six months ended:
 
December 31, 2012
 
Number of
Shares
 
WAEPS (1)
June 30, 2012
6,753,125

 
$1.44
Granted
1,007,500

 
$1.10
Forfeited
(483,334
)
 
$1.21
December 31, 2012
7,277,291

 
$1.36
Weighted average remaining contractual term
5.1 years
(1) Weighted average exercise price per share
The fair value of stock option grants was estimated using the following weighted average assumptions for the six months ended:
 
December 31,
 
2012
 
2011
Number of options
1,007,500
 
1,600,000
Weighted average grant date fair value per share
$0.61
 
$0.72
Expected dividend
$0.00
 
$0.00
Risk free interest rate
0.6
%
 
-
0.8
%
 
1.0
%
 
-
1.3
%
Expected life
5.1

 
-
6.0 years

 
5.3

 
-
6.0 years

Expected volatility (based on historical price)
60.3
%
 
-
63.5
%
 
61.2
%
 
-
62.8
%

Stock Compensation Expense
The Company recorded $0.3 million and $0.6 million of related stock compensation expense for the three and six months ended December 31, 2012, respectively, and $0.5 million and $0.9 million of related stock compensation expense for the three and six months ended December 31, 2011, respectively. Stock based compensation is included in general and administrative expense in the unaudited condensed consolidated statements of operations. The unrecorded expected future compensation expense related to stock option awards was $0.7 million as of December 31, 2012.
The Company's compensation policy is designed to provide the Company's non-employee directors with their annual base Board service compensation in the form of equity. Between July 1, 2012, and December 31, 2012, the Company issued a total of 171,565 shares of its common stock to non-employee directors pursuant to this policy.
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Earnings Per Share
6 Months Ended
Dec. 31, 2012
Earnings Per Share [Abstract]
Earnings Per Share
Note 8 - Earnings Per Common Share
The following table summarizes the computation of basic and diluted earnings per share:
 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
December 31,
 
December 31,
 
2012
 
2011
 
2012
 
2011
 
(In thousands, except share and per share amounts)
Net loss attributable to Magellan Petroleum Corporation
$
(7,285
)
 
$
(4,557
)
 
$
(12,594
)
 
$
(3,617
)
 
 
 
 
 
 
 
 
Basic weighted average shares outstanding
53,860,337

 
53,835,594

 
53,854,759

 
53,378,216

Add: dilutive effects of stock options and unvested stock grants (1)

 

 

 

Diluted weighted average common shares outstanding
53,860,337

 
53,835,594

 
53,854,759

 
53,378,216

 
 
 
 
 
 
 
 
Net loss per basic and diluted share outstanding
$
(0.14
)
 
$
(0.08
)
 
$
(0.23
)
 
$
(0.07
)
(1) There is no dilutive effect on earnings per share in periods with net losses.
Potentially dilutive securities excluded from the calculation of diluted shares outstanding include the following:
 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
December 31,
 
December 31,
 
2012
 
2011
 
2012
 
2011
Stock options

 

 

 
7,547,826

Non-vested restricted stock

 
204,167

 

 
204,167

Total

 
204,167

 

 
7,751,993

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Segment and Geographical Data
6 Months Ended
Dec. 31, 2012
Segment Reporting [Abstract]
Segment and Geographic Data
Note 9 - Segment Data
The Company conducts its operations through two wholly owned subsidiaries, NP, which operates in the United States, and MPAL, which is primarily active in Australia. The following table presents each segment as follows:
 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
December 31
 
December 31
 
2012
 
2011
 
2012
 
2011
 
(In thousands)
REVENUES:
 
 
 
 
 
 
 
NP
$
1,442

 
$
1,651

 
$
2,902

 
$
2,882

MPAL
306

 
1,551

 
507

 
4,056

Corporate

 

 

 

Inter-Segment Elimination

 

 

 

Consolidated revenues
$
1,748

 
$
3,202

 
$
3,409

 
$
6,938

 
 
 
 
 
 
 
 
CONSOLIDATED NET LOSS:
 
 
 
 
 
 
 
NP
$
(194
)
 
$
(307
)
 
$
(466
)
 
$
3,757

MPAL
(5,694
)
 
(2,378
)
 
(7,517
)
 
(3,309
)
Corporate
(1,393
)
 
(1,870
)
 
(4,436
)
 
(4,060
)
Inter-Segment Elimination
(4
)
 
(2
)
 
(175
)
 
(5
)
Consolidated net loss
$
(7,285
)
 
$
(4,557
)
 
$
(12,594
)
 
$
(3,617
)
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Commitments
6 Months Ended
Dec. 31, 2012
Commitments and Contingencies Disclosure [Abstract]
Commitments
Note 10 - Commitments and Contingencies
Refer to Note 10 - Commitments, of the Notes to the Consolidated Financial Statements in our Form 10-K for the fiscal year ended June 30, 2012, for information on all commitments.
In September 2011, the Company entered into a Purchase and Sale Agreement (the "Nautilus PSA") among the Company and the non-controlling interest owners of NP, for the Company's acquisition of the sellers' interests in NP (the "Nautilus Transaction"). The Nautilus PSA provides for potential future contingent production payments, payable by the Company in cash to the sellers, of up to a total of $5.0 million if certain increased average daily production milestones for the underlying properties are achieved. J. Thomas Wilson, a director and executive officer of the Company, has an approximately 52% interest in such contingent payments. See Note 5 above for information regarding the estimated discounted fair value of the future contingent consideration payable related to the Nautilus Transaction.
On August 28, 2012, Stratex Oil & Gas Holdings, Inc. ("Stratex") announced an unsolicited proposal for the acquisition of the Company's common stock. On September 10, 2012, the Company announced that its Board of Directors, after carefully considering the unsolicited proposal, had determined not to pursue the Stratex proposal. On September 12, 2012, the Company received a subpoena from the U.S. Securities and Exchange Commission (the "SEC") for the production of documents in connection with these announcements. On September 14, 2012, the Company received a letter from the Financial Industry Regulatory Authority ("FINRA") indicating that FINRA is conducting a review of trading in the Company's common stock surrounding the August 28, 2012 announcement by Stratex, and requesting information and documents from the Company in connection therewith. The Company has been cooperating fully with the SEC and FINRA, and has not received any further substantive correspondence from the SEC or FINRA since September 2012.
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Related Party Transactions
6 Months Ended
Dec. 31, 2012
Related Party Transactions [Abstract]
Related Party Transactions
Note 11 - Related Party Transactions
U.S. Federal Tax Withholdings. During the third quarter of fiscal year 2012, the Company identified a potential liability of approximately $2.0 million related to the Company's non-payment of required U.S. Federal tax withholdings in the course of its initial acquisition of a part of NP. In October 2009, Magellan acquired 83.5% of the membership interests in NP (the "Poplar Acquisition"), from the two majority owners of NP, White Bear LLC ("White Bear") and YEP I, SICAV-FES ("YEP I"). Both of these entities are affiliated with Nikolay V. Bogachev, a director of Magellan at the time of the Poplar Acquisition who has since resigned, and is a foreign national. Due to the status of YEP I as a foreign entity and the members of White Bear as foreign nationals, Magellan was required to make U.S. Federal tax withholdings from the payments to or for the benefit of White Bear and YEP I. Of the $2.0 million liability, $1.3 million was estimated to relate to the interest sold by White Bear, $0.6 million to the interest sold by YEP I, and $0.1 million to Magellan's interest on the late payment of the U.S. Federal tax withholdings.
With regards to White Bear, Mr. Bogachev has filed his U.S. income tax return and paid taxes due on the Poplar Acquisition and Magellan has no further related potential liability. With regards to YEP I, which is now a defunct entity, Magellan has concluded that it is unlikely that one of YEP I's successor entities will be filing the corresponding U.S. income tax return, and has initiated the disclosure process to the IRS and expects the liability to range between approximately $0.6 million and $0.8 million.
As of December 31, 2012, we have recorded a total liability of $0.7 million under accrued and other liabilities in the consolidated balance sheets related to this matter. That amount is comprised of $0.6 million in withholdings, penalties, and interest related to YEP I and $0.1 million related to Magellan's interest on its late payment of the U.S. Federal tax withholdings. There was no effect on the unaudited condensed consolidated statements of operations for the six months ended December 31, 2012, related to this transaction.
See Note 14 - Subsequent Events below for a discussion of a transaction subsequent to December 31, 2012 in which Mr. Bogachev had an interest.
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Oil and Gas Activities
6 Months Ended
Dec. 31, 2012
Oil and Gas Exploration and Production Industries Disclosures [Abstract]
Oil and Gas Activities
Note 12 - Oil and Gas Activities
The following table represents the capitalized costs under the successful efforts method for oil and gas properties as of:
 
December 31,
2012
 
June 30,
2012
 
(In thousands)
Proved oil and gas properties:
 
 
 
United Kingdom
$

 
$

United States
24,343

 
24,207

Australia
9,195

 
9,720

Less accumulated depletion, depreciation, and amortization
(5,669
)
 
(5,740
)
Total net proved oil and gas properties
$
27,869

 
$
28,187

 
 
 
 
Unproved oil and gas properties:
 
 
 
United Kingdom
$
1,932

 
$
2,598

United States
229

 
104

Australia
4,459

 
4,389

Total unproved oil and gas properties
$
6,620

 
$
7,091

 
 
 
 
Wells in Progress:
 
 
 
United Kingdom
$
2,044

 
$
2,026

United States
2,166

 
1,718

Australia

 

Total wells in progress
$
4,210

 
$
3,744


During the three months ended September 30, 2012, Magellan allowed a petroleum exploration and development license in the United Kingdom to expire at the end of its term. As a result, an impairment of $0.9 million was recorded in the unaudited condensed consolidated statement of operations. As of December 31, 2012, no further impairments were recorded.
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Termination Costs
6 Months Ended
Dec. 31, 2012
Termination Costs [Abstract]
Compensation Related Costs, General [Text Block]
Note 13 - Employee Severance Costs
The Company is required to record charges for one-time employee severance benefits and other associated costs as incurred. In July 2012, the Company incurred severance costs payable in connection with the termination of the employment of certain employees pursuant to the terms their employment agreements. For the six months ended December 31, 2012, the Company expensed total employee-related severance costs of $0.8 million, all of which was charged to general and administrative expense in the unaudited condensed consolidated statement of operations. The Company does not expect any additional benefits or other associated costs related to these terminations. The liability related to these severance costs is included in the unaudited condensed consolidated balance sheet under accrued and other liabilities.
A reconciliation of the beginning and ending liability balance for charges to general and administrative expense and cash payments for the six months ended December 31, 2012, is as follows:
 
Total
 
(In thousands)
June 30, 2012
$

Charges to general and administrative expense
828

Cash payments
(73
)
December 31, 2012
$
755

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Subsequent Events Subsequent Events (Notes)
6 Months Ended
Dec. 31, 2012
Subsequent Events [Abstract]
Subsequent Events [Text Block]
Note 14 - Subsequent Events
On January 14, 2013, the Company entered into a Collateral Purchase Agreement (the "Collateral Agreement") with Sopak AG, a Swiss subsidiary of Glencore International plc ("Sopak"), pursuant to which the Company agreed to purchase certain collateral (the "Collateral"), including: (i) 9,264,637 shares of the Company's common stock, (ii) a warrant granting Sopak the right to purchase from the Company an additional 4,347,826 shares of common stock, and (iii) a Registration Rights Agreement, dated as of June 29, 2009, and amended as of October 14, 2009, and June 23, 2010, between the Company, Young Energy Prize S.A., a Luxembourg corporation ("YEP"), and ECP Fund ("ECP"), SICAV-FIS, a Luxembourg corporation which is a subsidiary of YEP and ECP, for a purchase price of $10.0 million. YEP and ECP are entities affiliated with Nikolay V. Bogachev who served as a director of the Company until his resignation effective January 16, 2013. The Collateral was obtained by Sopak pursuant to the exercise of its rights under a Pledge and Security Agreement between Sopak and YEP, as disclosed in a Schedule 13D filed by Sopak with the SEC on September 28, 2012, in connection with Sopak's acquisition of beneficial ownership of more than 5% of the Company's common stock. The Collateral Agreement was completed and the Collateral was purchased by the Company on January 16, 2013.
On January 16, 2013, the Company's shareholders approved the 2012 Stock Incentive Plan. See Note 7 - Stock Based Compensation, for additional information.
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Basis of Presentation (Policies)
6 Months Ended
Dec. 31, 2012
Basis Of Presentation And Significant Accounting Policies [Abstract]
Basis of Presentation
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of Magellan and its wholly owned subsidiaries, NP and MPAL, and have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and in accordance with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete annual period financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature. All intercompany transactions have been eliminated. Operating results for the six months ended December 31, 2012, are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2013. This report should be read in conjunction with the consolidated financial statements and footnotes included in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2012.
All amounts presented are in United States dollars, unless otherwise noted. Amounts expressed in Australian currency are indicated as "AUD."
Use of Estimates
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of oil and gas reserves, assets and liabilities, disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Foreign Currency Translation
Foreign Currency Translation
The functional currencies of our foreign subsidiaries are their local currencies. Assets and liabilities of foreign subsidiaries are translated to United States dollars at period-end exchange rates, and our unaudited condensed consolidated statements of operations and cash flows are translated at average exchange rates during the period. Resulting translation adjustments are recorded as a separate component of stockholders' equity as accumulated other comprehensive income or loss.
Transactions denominated in currencies other than the local currency are recorded based on exchange rates at the time such transactions occurred. Subsequent changes in exchange rates result in foreign currency transaction gains and losses that are reflected in results of operations as unrealized (based on period end translation) or realized (upon settlement of the transactions) and reported under general and administrative expenses in the unaudited condensed consolidated statements of operations.
Goodwill
Goodwill
Goodwill represents the excess of the purchase price over the estimated fair value of the assets acquired net of the fair value of liabilities assumed in an acquisition. GAAP requires goodwill to be evaluated on an annual basis for impairment, or more frequently if events occur or circumstances change that could potentially result in impairment. We adopted the new guidance for our annual impairment test in fiscal year 2012 as allowed by Accounting Standards Update 2011-08 and therefore perform an annual assessment of qualitative factors for our impairment test. The qualitative factors used in our assessment include macroeconomic conditions, industry and market conditions, cost factors, and overall financial performance. For the six months ended December 31, 2012, there were no events or circumstances that would indicate that a goodwill impairment has occurred.
Business Combinations
Business Combinations
The Company applies the acquisition method of recording business combinations. Under this method, the Company recognizes and measures the identifiable assets acquired from, the liabilities assumed from, and any non-controlling interest in the acquiree. Any goodwill or gain is identified and recorded. We engage independent valuation consultants to assist us in determining the fair values of crude oil and natural gas properties acquired, and other third party specialists as needed to assist us in assessing the fair value of other assets and liabilities assumed. These valuations require management to make significant estimates and assumptions, especially with respect to the oil and gas properties.
Stockholders' Equity
Treasury Stock
On September 24, 2012, the Company announced that its Board of Directors had approved a stock repurchase program authorizing the Company to repurchase up to a total value of $2.0 million in shares of its common stock. The size and timing of such purchases will be based on market and business conditions as well as other factors. The Company is not obligated to purchase any shares of its common stock. The authorization will expire on August 21, 2014, and purchases under the program can be discontinued at any time.
From the inception of the program through December 31, 2012, we purchased 149,539 shares of our common stock for $137 thousand, or an average price of $0.916 per share. These shares are currently being held in treasury at cost.
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Acquisitions and Divestitures (Tables)
6 Months Ended
Dec. 31, 2012
Acquisitions and Divestitures [Abstract]
Schedule of Purchase Price Allocation
The following table summarizes the allocation of the consideration received for the assets transferred as a result of the Santos SA as of June 30, 2012.
 
Total
 
(In thousands)
Consideration received
 
Net purchase price per Santos SA
$
25,493

Purchase price adjustments
1,138

Total
$
26,631

 
 
Allocation of the consideration received to fair value of assets
 
Proved oil and gas properties (Palm Valley)
$
3,403

Unproved oil and gas properties (Dingo)
2,957

Land, buildings, and equipment (Palm Valley)
370

Total allocation of the fair value received
6,730

Mereenie liabilities given up, net
2,805

Gain on sale of assets
(36,166
)
Total
$
(26,631
)
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Debt (Tables)
6 Months Ended
Dec. 31, 2012
Debt Disclosure [Abstract]
Schedule of Long-term Debt Instruments
Long term debt relates to a $1.7 million note payable re-issued in January 2011 (the "Note Payable"). The Note Payable will be fully amortized in June 2014. The outstanding principal as of December 31, 2012, and June 30, 2012, consisted of the following:
 
December 31,
2012
 
June 30,
2012
 
(In thousands)
Note payable
$
606

 
$
870

Less current portion of note payable
(432
)
 
(480
)
Long term debt, excluding current portion
$
174

 
$
390

Minimum Future Principal Maturities
As of December 31, 2012, the minimum future principal maturities of long term debt were as follows:
 
December 31,
2012
 
(In thousands)
One year
$
432

Two years
174

Total
$
606

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Asset Retirement Obligations (Tables)
6 Months Ended
Dec. 31, 2012
Asset Retirement Obligation Disclosure [Abstract]
Asset Retirement Obligations Roll-Forward
The following table summarizes the asset retirement obligation activity for the six months ended December 31, 2012:
 
Total
 
(In thousands)
June 30, 2012
$
7,784

Liabilities assumed
3

Accretion expense
223

Revision to estimate
(306
)
Effect of exchange rate changes
89

December 31, 2012
7,793

Less current asset retirement obligation
339

Long term asset retirement obligation
$
7,454

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Fair Value Measurements (Tables)
6 Months Ended
Dec. 31, 2012
Fair Value Disclosures [Abstract]
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis
The following table presents the amounts of assets and liabilities carried at fair value by the level in which they are classified within the valuation hierarchy for the six months ended:
 
December 31, 2012
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(In thousands)
Assets
 
 
 
 
 
 
 
Cash and cash equivalents
$
31,704

 
$

 
$

 
$
31,704

Securities available for sale (1)
133

 

 

 
133

 
$
31,837

 
$

 
$

 
$
31,837

Liabilities
 
 
 
 
 
 
 
Contingent consideration payable
$

 
$

 
$
4,233

 
$
4,233

 
 
 
 
 
 
 
 
 
June 30, 2012
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(In thousands)
Assets
 
 
 
 
 
 
 
Cash and cash equivalents
$
41,215

 
$

 
$

 
$
41,215

Securities available for sale (1)
155

 

 

 
155

 
$
41,370

 
$

 
$

 
$
41,370

Liabilities
 
 
 
 
 
 
 
Contingent consideration payable
$

 
$

 
$
4,072

 
$
4,072

(1) Included in the unaudited condensed consolidated balance sheets under prepaid and other assets.
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation
The following table presents a roll forward of liabilities measured at fair value using significant unobservable inputs (Level 3) for the six months ended December 31, 2012:
 
Total
 
(In thousands)
June 30, 2012
$
4,072

Accretion of contingent consideration payable
161

December 31, 2012
$
4,233

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Stock Based Compensation (Tables)
6 Months Ended
Dec. 31, 2012
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock Option Activity
The following table summarizes the stock option activity for the six months ended:
 
December 31, 2012
 
Number of
Shares
 
WAEPS (1)
June 30, 2012
6,753,125

 
$1.44
Granted
1,007,500

 
$1.10
Forfeited
(483,334
)
 
$1.21
December 31, 2012
7,277,291

 
$1.36
Weighted average remaining contractual term
5.1 years
(1) Weighted average exercise price per share
Fair Value of Shares Issued Under the Stock Plan and Weighted-Average Assumptions
The fair value of stock option grants was estimated using the following weighted average assumptions for the six months ended:
 
December 31,
 
2012
 
2011
Number of options
1,007,500
 
1,600,000
Weighted average grant date fair value per share
$0.61
 
$0.72
Expected dividend
$0.00
 
$0.00
Risk free interest rate
0.6
%
 
-
0.8
%
 
1.0
%
 
-
1.3
%
Expected life
5.1

 
-
6.0 years

 
5.3

 
-
6.0 years

Expected volatility (based on historical price)
60.3
%
 
-
63.5
%
 
61.2
%
 
-
62.8
%

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Earnings Per Share (Tables)
6 Months Ended
Dec. 31, 2012
Earnings Per Share [Abstract]
Schedule of Earnings Per Share, Basic and Diluted
The following table summarizes the computation of basic and diluted earnings per share:
 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
December 31,
 
December 31,
 
2012
 
2011
 
2012
 
2011
 
(In thousands, except share and per share amounts)
Net loss attributable to Magellan Petroleum Corporation
$
(7,285
)
 
$
(4,557
)
 
$
(12,594
)
 
$
(3,617
)
 
 
 
 
 
 
 
 
Basic weighted average shares outstanding
53,860,337

 
53,835,594

 
53,854,759

 
53,378,216

Add: dilutive effects of stock options and unvested stock grants (1)

 

 

 

Diluted weighted average common shares outstanding
53,860,337

 
53,835,594

 
53,854,759

 
53,378,216

 
 
 
 
 
 
 
 
Net loss per basic and diluted share outstanding
$
(0.14
)
 
$
(0.08
)
 
$
(0.23
)
 
$
(0.07
)
(1) There is no dilutive effect on earnings per share in periods with net losses.
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share
Potentially dilutive securities excluded from the calculation of diluted shares outstanding include the following:
 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
December 31,
 
December 31,
 
2012
 
2011
 
2012
 
2011
Stock options

 

 

 
7,547,826

Non-vested restricted stock

 
204,167

 

 
204,167

Total

 
204,167

 

 
7,751,993

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Segment and Geographical Data (Tables)
6 Months Ended
Dec. 31, 2012
Segment Reporting [Abstract]
Schedule of Segment Reporting Information, by Segment
The Company conducts its operations through two wholly owned subsidiaries, NP, which operates in the United States, and MPAL, which is primarily active in Australia. The following table presents each segment as follows:
 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
December 31
 
December 31
 
2012
 
2011
 
2012
 
2011
 
(In thousands)
REVENUES:
 
 
 
 
 
 
 
NP
$
1,442

 
$
1,651

 
$
2,902

 
$
2,882

MPAL
306

 
1,551

 
507

 
4,056

Corporate

 

 

 

Inter-Segment Elimination

 

 

 

Consolidated revenues
$
1,748

 
$
3,202

 
$
3,409

 
$
6,938

 
 
 
 
 
 
 
 
CONSOLIDATED NET LOSS:
 
 
 
 
 
 
 
NP
$
(194
)
 
$
(307
)
 
$
(466
)
 
$
3,757

MPAL
(5,694
)
 
(2,378
)
 
(7,517
)
 
(3,309
)
Corporate
(1,393
)
 
(1,870
)
 
(4,436
)
 
(4,060
)
Inter-Segment Elimination
(4
)
 
(2
)
 
(175
)
 
(5
)
Consolidated net loss
$
(7,285
)
 
$
(4,557
)
 
$
(12,594
)
 
$
(3,617
)
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Oil and Gas Activities (Tables)
6 Months Ended
Dec. 31, 2012
Oil and Gas Exploration and Production Industries Disclosures [Abstract]
Cost Incurred in Oil and Gas Property Acquisition, Exploration, and Development Activities Disclosure
Note 12 - Oil and Gas Activities
The following table represents the capitalized costs under the successful efforts method for oil and gas properties as of:
 
December 31,
2012
 
June 30,
2012
 
(In thousands)
Proved oil and gas properties:
 
 
 
United Kingdom
$

 
$

United States
24,343

 
24,207

Australia
9,195

 
9,720

Less accumulated depletion, depreciation, and amortization
(5,669
)
 
(5,740
)
Total net proved oil and gas properties
$
27,869

 
$
28,187

 
 
 
 
Unproved oil and gas properties:
 
 
 
United Kingdom
$
1,932

 
$
2,598

United States
229

 
104

Australia
4,459

 
4,389

Total unproved oil and gas properties
$
6,620

 
$
7,091

 
 
 
 
Wells in Progress:
 
 
 
United Kingdom
$
2,044

 
$
2,026

United States
2,166

 
1,718

Australia

 

Total wells in progress
$
4,210

 
$
3,744

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Termination Costs (Tables)
6 Months Ended
Dec. 31, 2012
Termination Costs [Abstract]
Schedule of Restructuring and Related Costs [Table Text Block]
A reconciliation of the beginning and ending liability balance for charges to general and administrative expense and cash payments for the six months ended December 31, 2012, is as follows:
 
Total
 
(In thousands)
June 30, 2012
$

Charges to general and administrative expense
828

Cash payments
(73
)
December 31, 2012
$
755

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Basis of Presentation (Description of Operations) (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
1 Months Ended 6 Months Ended 12 Months Ended 14 Months Ended
Sep. 30, 2012
Dec. 31, 2012
segment
Dec. 31, 2011
Jun. 30, 2012
Dec. 31, 2012
Presentation and Significant Accounting Policies Information [Line Items]
Number of Reportable Segments 2
Treasury Stock, Shares, Acquired 149,539 0
Payments for Repurchase of Common Stock $ 2,000 $ 137 $ 0 $ 137
Treasury Stock Acquired, Average Cost Per Share $ 0.916
Nautilus Poplar, LLC (NP)
Presentation and Significant Accounting Policies Information [Line Items]
Subsidiary, Ownership Percentage 100.00% 100.00%
Magellan Petroleum Australia Limited (MPAL)
Presentation and Significant Accounting Policies Information [Line Items]
Subsidiary, Ownership Percentage 100.00% 100.00%
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Acquisitions and Divestitures (Purchase Price Allocation and Other Disclosures) (Details) (Santos Sales Agreement)
6 Months Ended 12 Months Ended
Dec. 31, 2012
USD ($)
Jun. 30, 2012
USD ($)
Jun. 30, 2012
AUD
Dec. 31, 2012
Mereenie Operating Joint Venture
May 25, 2012
Dingo Joint Venture
May 25, 2012
Palm Valley Joint Venture
Disposal Group, Other Information [Abstract]
Ownership Interest Sold 35.00%
Goodwill, Written off Related to Sale of Business Unit $ 2,500,000
Joint Venture, Ownership Interest Sold by Third Party 66.00% 48.00%
Other Payments to Acquire Businesses 17,500,000
Disposal Group, Cost of Disposed Entity [Abstract]
Consideration received, net purchase price per Santos SA 25,493,000
Consideration received, purchase price adjustments 1,138,000
Consideration received total 26,631,000
Disposal Group, Consideration Received Allocation [Abstract]
Allocation of the consideration received, proved oil and gas properties (Palm Valley) 3,403,000
Allocation of the consideration received, unproved oil and gas properties (Dingo) 2,957,000
Allocation of the consideration received, land, buildings, and equipment (Palm Valley) 370,000
Total allocation of the fair value received 6,730,000
Mereenie liabilities given up, net 2,805,000
Gain on sale of assets $ 36,166,000
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Debt (Long Term Debt Instruments) (Details) (USD $)
6 Months Ended
Dec. 31, 2012
Jun. 30, 2012
Jan. 31, 2011
Long-term Debt, Current and Noncurrent [Abstract]
Note payable $ 606,000
Short term line of credit 185,000 50,000
Notes Payable | Note Payable Due June 2014
Long-term Debt, Current and Noncurrent [Abstract]
Note payable 606,000 870,000
Less current portion of note payable (432,000) (480,000)
Long term debt, excluding current maturities 174,000 390,000
Note payable issued amount 1,700,000
Basis Spread on Wall Street Journal Prime Rate 1.00%
Variable Rate Floor 6.25%
Variable Interest Rate Applicable at Period End 3.25%
Interest Rate at Period End 6.25%
Line of Credit | Working Capital Line of Credit
Long-term Debt, Current and Noncurrent [Abstract]
Variable Interest Rate Applicable at Period End 6.25%
Maximum Borrowing Capacity 1,000,000
Short term line of credit 200,000
Amount Available Under Line of Credit 800,000
Letter of Credit | Working Capital Line of Credit
Long-term Debt, Current and Noncurrent [Abstract]
Amount Outstanding 25,000
Business Credit Cards | Working Capital Line of Credit
Long-term Debt, Current and Noncurrent [Abstract]
Amount Outstanding 25,000
Collateralized Debt Obligations | Payment Guarantee
Long-term Debt, Current and Noncurrent [Abstract]
Guarantee Maximum Exposure $ 6,000,000
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Debt (Debt Maturities Schedule) (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Debt Disclosure [Abstract]
One year $ 432
Two years 174
Note payable $ 606
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Asset Retirement Obligations (Roll-Forward) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2012
Jun. 30, 2012
Asset Retirement Obligation Disclosure [Abstract]
Asset Retirement Obligation, Liabilities Incurred $ 3 $ 0 $ 3
Asset Retirement Obligation, Roll Forward Analysis [Roll Forward]
Balance at beginning of period 7,784
Accretion expense 223
Revision to estimate (306)
Effect of exchange rate changes 89
Balance at end of period 7,793 7,793
Less current asset retirement obligation 339 339 329
Long term asset retirement obligation $ 7,454 $ 7,454 $ 7,455
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Fair Value Measurements (Details) (USD $)
3 Months Ended
Dec. 31, 2012
Dec. 31, 2012
Fair Value, Measurements, Recurring
Dec. 31, 2012
Fair Value, Inputs, Level 1
Fair Value, Measurements, Recurring
Jun. 30, 2012
Fair Value, Inputs, Level 1
Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents $ 31,704,000 $ 41,215,000
Cash 1,600,000
Cash equivalents $ 30,100,000
Cash Equivalent, Maturity Period 90 days
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Fair Value Measurements (Assets and Liabilities Carried at Fair Value by Classification Level in Valuation Hierarchy) (Details) (Recurring, USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Jun. 30, 2012
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents $ 31,704 $ 41,215
Securities available for sale 133 155
Assets 31,837 41,370
Contingent consideration payable 0 0
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents 0 0
Securities available for sale 0 [1] 0 [1]
Assets 0 0
Contingent consideration payable 0 0
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents 0 0
Securities available for sale 0 [1] 0 [1]
Assets 0 0
Contingent consideration payable 4,233 4,072
Estimate of Fair Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents 31,704 41,215
Securities available for sale 133 [1] 155 [1]
Assets 31,837 41,370
Contingent consideration payable $ 4,233 $ 4,072
[1] Included in the unaudited condensed consolidated balance sheets under prepaid and other assets.
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Fair Value Measurements (Unobservable Input Reconciliation) (Details) (Recurring, Level 3, USD $)
In Thousands, unless otherwise specified
6 Months Ended
Dec. 31, 2012
Jun. 30, 2012
Recurring | Level 3
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Business Acquisition, Contingent Consideration, at Fair Value $ 4,233 $ 4,072
Accretion Expense $ 161
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Income Taxes (Income Before Income Tax, Domestic and Foreign) (Details)
6 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Net Income (Loss) Before Income Taxes
Effective Income Tax Rate, Continuing Operations 4.96% 0.00%
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Stock Based Compensation (Details) (USD $)
In Millions, except Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Jan. 16, 2013
2012 Stock Incentive Plan
Dec. 08, 2010
1998 Stock Incentive Plan
Jan. 16, 2013
Employee Stock Option [Member]
Jan. 16, 2013
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized 5,000,000 288,435
Share-based compensation expense $ 0.3 $ 0.5 $ 0.6 $ 0.9
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized $ 0.7 $ 0.7
Maximum number of shares allowed to be issued each year 1,000,000 500,000
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Stock Based Compensation (Stock Option Activity) (Details) (USD $)
6 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Balance at beginning of year (in shares) 6,753,125
Granted (in shares) 1,007,500 [1] 1,600,000 [1]
Forfeited (in shares) (483,334)
Options outstanding at year end (in shares) 7,277,291
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term 5 years 1 month 6 days [2]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward]
Weighted Average Exercise Price per Share, Balance at beginning of year $ 1.44 [2]
Weighted Average Exercise Price Per Share, Granted $ 1.1 [2]
Weighted Average Exercise Price, Forfeited $ 1.21 [2]
Weighted Average Exercise Price per Share, Options outstanding at year end $ 1.36 [2]
Stock options | 1998 Stock Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares available for grant 5,288,435
Performance Based Options
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Granted (in shares) 75,000
Other Options
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Granted (in shares) 882,500
[1]
[2] Weighted average exercise price per share
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Stock Based Compensation (Fair Value of Shares Issued Under the Stock Plan and Weighted-Average Assumptions) (Details) (USD $)
6 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock Issued During Period, Shares, Other 171,565
Number of options 1,007,500 [1] 1,600,000 [1]
Weighted-average grant date fair value per share $ 0.61 $ 0.72
Expected dividend $ 0 $ 0
Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility, Minimum 60.30% 61.20%
Expected volatility, Maximum 63.50% 62.80%
Stock options | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk free interest rate 0.60% 1.00%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term 5 years 1 month 17 days 5 years 3 months
Stock options | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk free interest rate 0.80% 1.30%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term 6 years 6 years
[1]
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Earnings Per Share (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Earnings Per Share [Abstract]
Net income (loss) attributable to Magellan Petroleum Corporation $ (7,285) $ (4,557) $ (12,594) $ (3,617)
Weighted Average Number of Shares Outstanding Reconciliation [Abstract]
Basic weighted-average shares outstanding (in shares) 53,860,337 53,835,594 53,854,759 53,378,216
Add: dilutive effects of stock options and unvested stock grants 0 [1] 0 [1] 0 [1] 0 [1]
Diluted weighted-average common shares outstanding (in shares) 53,860,337 53,835,594 53,854,759 53,378,216
Basic net loss per common share (dollars per share) $ (0.14) $ (0.08) $ (0.23) $ (0.07)
[1] There is no dilutive effect on earnings per share in periods with net losses.
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Earnings Per Share (Schedule of Antidilutive Securities) (Details)
3 Months Ended 6 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potentially dilutive securities 0 204,167 0 7,751,993
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potentially dilutive securities 0 0 0 7,547,826
Non-vested restricted stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potentially dilutive securities 0 204,167 0 204,167
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Segment and Geographical Data (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2012
segment
Dec. 31, 2011
Segment Reporting Information [Line Items]
Number of Reportable Segments 2
Revenues $ 1,748 $ 3,202 $ 3,409 $ 6,938
Revenue, Net 1,748 3,202 3,409 6,938
Consolidated net income (loss) (7,285) (4,557) (12,594) (3,617)
Nautilus Poplar, LLC (NP)
Segment Reporting Information [Line Items]
Revenues 1,442 1,651 2,902 2,882
Consolidated net income (loss) (194) (307) (466) 3,757
Magellan Petroleum Australia Limited (MPAL)
Segment Reporting Information [Line Items]
Revenues 306 1,551 507 4,056
Consolidated net income (loss) (5,694) (2,378) (7,517) (3,309)
Corporate
Segment Reporting Information [Line Items]
Revenues 0 0 0 0
Consolidated net income (loss) (1,393) (1,870) (4,436) (4,060)
Inter-segment Elimination
Segment Reporting Information [Line Items]
Revenues 0 0 0 0
Consolidated net income (loss) $ (4) $ (2) $ (175) $ (5)
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Commitments (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Loss Contingencies [Line Items]
Business Acquisition, Contingent Consideration, Potential Cash Payment $ 5
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Related Party Transactions (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Minimum
Dec. 31, 2012
Maximum
Mar. 31, 2012
US Federal Tax Withholding
Dec. 31, 2012
US Federal Tax Withholding
Accrued and Other Liabilities
Dec. 31, 2012
US Federal Tax Withholding, Interest
Accrued and Other Liabilities
Mar. 31, 2012
Young Energy Prize S.A. (YEP)
US Federal Tax Withholding
Mar. 31, 2012
White Bear, LLC
US Federal Tax Withholding
Oct. 31, 2009
Nautilus Poplar, LLC (NP)
owner
Mar. 31, 2012
Nautilus Poplar, LLC (NP)
US Federal Tax Withholding
Dec. 31, 2012
Mr. Bogachev
US Federal Tax Withholding
Accrued and Other Liabilities
Related Party Transaction [Line Items]
Loss Contingency, Estimate of Possible Loss $ 0.1 $ 0.6 $ 1.3 $ 2
Amount of Income Tax Liability, If Not Paid by Related Party 0.6 0.8
Business Acquisition, Percentage of Membership Interests Acquire 83.50%
Number of Majority Owners 2
Loss Contingency Accrual, at Carrying Value $ 0.7 $ 0.1 $ 0.6
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Oil and Gas Activities (Costs Incurred in Oil and Gas Property Acquisition, Exploration and Development Activities) (Details) (USD $)
3 Months Ended 6 Months Ended 12 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Dec. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Jun. 30, 2012
Costs Incurred, Oil and Gas Property Acquisition, Exploration, and Development Activities [Line Items]
Proved $ 27,869,000 $ 28,187,000
Accumulated Depreciation, Depletion and Amortization, Property, Plant and Equipment, Period Increase (Decrease) (5,669,000) (5,740,000)
Unproved 6,620,000 7,091,000
Exploration Costs 4,210,000 3,744,000
Impairment of Oil and Gas Properties 0 900,000 0 890,000 0
Other Asset Impairment Charges 0
United States
Costs Incurred, Oil and Gas Property Acquisition, Exploration, and Development Activities [Line Items]
Proved 24,343,000 24,207,000
Unproved 229,000 104,000
Exploration Costs 2,166,000 1,718,000
Australia
Costs Incurred, Oil and Gas Property Acquisition, Exploration, and Development Activities [Line Items]
Proved 9,195,000 9,720,000
Unproved 4,459,000 4,389,000
Exploration Costs 0 0
United Kingdom
Costs Incurred, Oil and Gas Property Acquisition, Exploration, and Development Activities [Line Items]
Proved 0 0
Unproved 1,932,000 2,598,000
Exploration Costs $ 2,044,000 $ 2,026,000
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Termination Costs (Details) (USD $)
In Thousands, unless otherwise specified
6 Months Ended
Dec. 31, 2012
Termination Costs [Abstract]
Restructuring Costs $ 828
Supplemental Unemployment Benefits, Severance Benefits 0
Payments for Postemployment Benefits (73)
Supplemental Unemployment Benefits, Severance Benefits $ 755
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Subsequent Events (Details) (USD $)
In Millions, except Share data, unless otherwise specified
6 Months Ended 12 Months Ended
Dec. 31, 2012
Jun. 30, 2012
Subsequent Event [Line Items]
Treasury Stock, Shares, Acquired 149,539 0
Subsequent Event [Member]
Subsequent Event [Line Items]
Treasury Stock, Shares, Acquired 9,264,637
Stock Issued During Period, Shares, Acquisitions 4,347,826
Repayments of Related Party Debt 10
Sale of Stock, Percentage of Ownership after Transaction 5.00%
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