Quarterly report pursuant to Section 13 or 15(d)

INVESTMENT IN AMAK

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INVESTMENT IN AMAK
 6 Months Ended
Jun. 30, 2018
Equity Method Investments and Joint Ventures [Abstract]  
INVESTMENT IN AMAK
INVESTMENT IN AMAK

In first quarter 2018, we completed an exchange of shares with certain shareholders whereby such shareholders traded 65,000 common shares of TREC in exchange for 24,489 shares of our AMAK stock.  The 65,000 shares were accounted for as treasury stock.  This transaction reduced our ownership percentage from 33.44% to 33.41%.

As of June 30, 2018, and December 31, 2017, the Company had a non-controlling equity interest of 33.4% in AMAK of approximately $45.5 million and $45.1 million, respectively. This investment is accounted for under the equity method. There were no events or changes in circumstances that may have an adverse effect on the fair value of our investment in AMAK at June 30, 2018.

AMAK's financial statements were prepared in the functional currency of AMAK which is the Saudi Riyal ("SR").  In June 1986 the SR was officially pegged to the U. S. Dollar ("USD") at a fixed exchange rate of 1 USD to 3.75 SR.

The summarized results of operation and financial position for AMAK are as follows:








Results of Operations
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2018

 
2017

 
2018

 
2017

 
 
(thousands of dollars)
 
(thousands of dollars)
Sales
 
$
19,494

 
$
—

 
$
33,581

 
$
2,256

Cost of sales
 
16,555

 
8,901

 
29,061

 
12,463

Gross profit (loss)
 
$
2,939

 
$
(8,901
)
 
$
4,520

 
$
(10,207
)
General, administrative and other expenses
 
3,265

 
1,971

 
5,166

 
4,559

Net Loss
 
$
(326
)
 
$
(10,872
)
 
$
(646
)
 
$
(14,766
)
Depreciation and amortization
 
8,281

 
7,609

 
15,982

 
10,664

Net income (loss) before depreciation and amortization
 
$
7,955

 
$
(3,263
)
 
$
15,336

 
$
(4,102
)



Financial Position
 
 
June 30,

 
December 31,

 
 
2018

 
2017

 
 
(thousands of dollars)
Current assets
 
$
33,273

 
$
23,333

Noncurrent assets
 
228,733

 
237,875

Total assets
 
$
262,006

 
$
261,208

 
 
 
 
 
Current liabilities
 
$
22,873

 
$
24,439

Long term liabilities
 
71,520

 
68,837

Shareholders' equity
 
167,613

 
167,932

 
 
$
262,006

 
$
261,208


The equity in the income or loss of AMAK reflected on the consolidated statements of income for the three months and six months ended June 30, 2018, and 2017, is comprised of the following:

 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2018

 
2017

 
2018

 
2017

 
 
(thousands of dollars)
 
(thousands of dollars)
AMAK Net Loss
 
$
(326
)
 
$
(10,872
)
 
$
(646
)
 
$
(14,766
)
 
 
 
 
 
 
 
 
 
Company's share of loss reported by AMAK
 
$
(109
)
 
$
(3,635
)
 
$
(216
)
 
$
(4,938
)
Amortization of difference between Company's investment in AMAK and Company's share of net assets of AMAK
 
337

 
337

 
674

 
674

Equity in earnings (loss) of AMAK
 
$
228

 
$
(3,298
)
 
$
458

 
$
(4,264
)


See our Annual Report on Form 10-K for the year ended December 31, 2017 for additional information.

At June 30, 2018, and December 31, 2017, we had a receivable from AMAK of approximately $204,000 and $121,000, respectively, relating to unreimbursed travel and Board expenses which are included in prepaid and other assets.  We did not advance any cash to AMAK during 2018.