General (Policies)

6 Months Ended

Jun. 30, 2012

General

Basis of Presentation

Basis of Presentation

        The Company's unaudited interim condensed consolidated financial statements included herein have been prepared on the accrual basis of accounting in accordance with GAAP and pursuant to the rules and regulations of the SEC. Accordingly, certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. The Company believes that the presentations and disclosures herein are adequate for a fair presentation. The unaudited interim condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the interim periods presented. These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements included in its 2011 Form 10-K. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year.

        The unaudited interim condensed consolidated financial statements include the accounts of Geokinetics Inc. and its subsidiaries. All significant intercompany transactions have been eliminated in consolidation.

        Certain prior period amounts have been reclassified to conform to current period financial statement presentation.

Liquidity and Recent Developments

Liquidity and Recent Developments

        On May 31, 2012, the Company appointed David J. Crowley as the President and Chief Operating Officer of the Company.

        On May 9, 2012, the Company entered into (i) a Series B Preferred Stock Subscription and Exchange Agreement (the "Series B Exchange Agreement") pursuant to which all the shares of Series B Senior Convertible Preferred Stock were exchanged for shares of the Series B-1 Senior Convertible Preferred Stock of the Company and (ii) a Series C Preferred Stock Subscription and Exchange Agreement pursuant to which all the shares of Series C Senior Preferred Stock were exchanged for shares of the Series C-1 Senior Preferred Stock of the Company. Additionally, on May 9, 2012, the Company amended the terms of the 2008 Warrants and 2010 Warrants. See notes 4 and 5.

        On March 16, 2012, the Company entered into a commitment letter with Avista and an affiliate of Avista to provide up to an additional $10.0 million in debt financing until January 1, 2013. Avista's obligations under the commitment letter are subject to the execution and delivery of definitive documents and other closing conditions. See note 3. The Company is currently pursuing various financing alternatives that may result in our termination of the commitment letter prior to entering into definitive documents with Avista and its affiliate, although there can be no assurances that we will be able to successfully implement any such alternatives.

        On March 15, 2012, the Company entered into a purchase and sale agreement pursuant to which the Company agreed to sell certain North American seismic data in exchange for $10.0 million in cash. The transaction closed on March 30, 2012. See note 2.

        The Company continued to incur operating losses primarily due to delays in project commencements, low asset utilization, idle crew costs and the Mexico liftboat incident, which resulted in serious concerns about the Company's liquidity beginning in 2011 and continuing into 2012. In an effort to address these liquidity issues, the Company's management instituted a number of steps, including the decision to close some of its regional offices and exit certain operations around the world where the long-term prospects for profitability were not in line with the Company's business goals. Additionally, the Company's management continues to focus on cost reductions, potential additional sales of assets, further centralization of bidding and management services to provide a higher level of control over costs and bidding on seismic acquisition services under careful consideration of required capital expenditures for additional equipment or restrictions in cash required for bid or performance bonds.

        Management is focused on improving liquidity through the implementation of the actions described above, although any unforeseen unfavorable developments could have a further material adverse effect on the Company's liquidity and financial condition. We anticipate that additional efforts will be required to address the Company's high levels of indebtedness and we continue to work with our financial advisor to address these issues through a possible restructuring of the Company's indebtedness and existing capital structure. Given the Company's high levels of indebtedness and currently outstanding preferred stock which have preference over our common stock, we believe it is unlikely that any significant value would be ascribed to our common stock after any such restructuring.

        In addition to working with the Company's financial advisor regarding a possible restructuring of our indebtedness and capital structure, the Company's management is currently reviewing other alternatives, and may adopt strategies such as reducing or delaying capital investments, delaying bids on new sales or seeking to raise additional capital through debt or equity financing. However, the Company's current credit rating limits the Company's ability to access the debt capital markets and the recent low trading price of the Company's common stock severely limits the Company's ability to raise substantial capital in the equity capital markets. Among other restrictions, our Notes and the Whitebox Revolving Credit Facility also limit our ability to incur or guarantee additional debt or to grant additional liens on our assets which further limits our ability to raise additional capital through debt financing. The ability to timely raise sufficient capital may also be limited by NYSE MKT stockholder approval requirements for certain transactions involving the issuance of the Company's common stock or securities convertible into the Company's common stock.

        These alternatives may not be successful, and the Company could face a substantial liquidity shortfall and might be required to dispose of certain assets or operations or take other actions to meet its operating and debt service obligations. The failure to meet its debt service obligations would constitute an event of default under the Whitebox Revolving Credit Facility and the Notes, and the Lenders or Note holders could declare all amounts outstanding under the Whitebox Revolving Credit Facility or Notes to be immediately due and payable. In such event, the Company would likely be forced to pursue a restructuring of its indebtedness and capital structure and we believe that, given our high levels of indebtedness and currently outstanding preferred stock which have preference over our common stock, it is unlikely that any significant value would be ascribed to our existing common stock after any such restructuring.

Recent Accounting Standards Adopted and Not Yet Adopted

Recent Accounting Standards Not Yet Adopted

        In December 2011, the FASB issued an update to ASC 220, Presentation of Comprehensive Income. This ASU defers a specific requirement to present items that are reclassified out of accumulated other comprehensive income to net income alongside their respective components of net income and other comprehensive income. The amendment will be temporary to allow the FASB time to redeliberate the presentation requirements for reclassifications out of accumulated other comprehensive income.

        In December 2011, the FASB and the IASB issued an update to ASC 210, Balance Sheet—Disclosures about Offsetting Assets and Liabilities. This ASU requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The guidance is effective for annual and interim reporting periods beginning on or after January 1, 2013. The disclosures required by this ASU should be presented retrospectively for all comparative periods presented. The Company is currently evaluating the provisions of this ASU.

Recent Accounting Standards Adopted

        In June 2011, the FASB issued an update to ASC 220, Presentation of Comprehensive Income. This ASU provides an entity with the option to present comprehensive income in either (i) a single statement that presents the components of net income and total net income, the components of other comprehensive income and total other comprehensive income, and a total for comprehensive income; or (ii) a two-statement approach which presents the components of net income and total net income in a first statement, immediately followed by a financial statement that presents the components of other comprehensive income, a total for other comprehensive income, and a total for comprehensive income. The presentation of other comprehensive income in the statement of changes in equity was eliminated. The guidance is applied retrospectively and the Company adopted the provisions of this ASU on January 1, 2012, with the exception of those amendments relating to the presentation of reclassification adjustments out of accumulated other comprehensive income, which have been deferred as mentioned above. The Company elected the option to present comprehensive income in a single statement. However, the adoption of this guidance did not have an impact on the Company's consolidated financial statements as there were no items related to comprehensive income during the three and six months ended June 30, 2012 and 2011.

        In May 2011, the FASB issued an update to ASC 820, Fair Value Measurements. This ASU clarifies the application of certain fair value measurement requirements and requires, among other things, expanded disclosures for Level 3 fair value measurements and the categorization by level for items for which fair value is required to be disclosed in accordance with ASC 825, Financial Instruments. The guidance is applied prospectively and the Company adopted the provisions of this ASU on January 1, 2012. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements. See note 6.