Arena Resources, Inc. Announces Second Quarter and Six Month 2007 Financial
and Operating Results
47% Increase In Revenue For The Three Months to Record $21.6 Million
Tulsa, Oklahoma — August 7, 2007 — Arena Resources, Inc. (NYSE-ARD)(“Arena”)(“Company”) announced today financial results for the three months and six months ended June 30, 2007. For the three month period ended June 30, 2007, Arena had oil and gas revenues of $21,620,299, compared to $14,690,068 for the quarter ended June 30, 2006, a 47% increase and net income of $7,899,378, or $0.49 per fully diluted share, compared to net income of $6,445,224, or $0.44 per fully diluted share, for the same period in 2006, a 23% increase. For the six month period ended June 30, 2007, the Company reported oil and gas revenues of $38,271,600, compared to oil and gas revenues of $25,070,463 for the six month period ended June 30, 2006, a 53% increase. Net income for the six month period ended June 30, 2007 was $13,607,268, or $0.86 per fully diluted share, compared to net income of $10,027,900, or $0.70 per fully diluted share, for the same period in 2006, a 36% increase.
The revenue increase was a result of increases in production volumes due to increased development activity, offset by a decrease in the realized per barrel oil prices of 11% and 10% for the three and six month periods ended June 30, 2007, respectively. For the three months ended June 30, 2007, oil sales volume increased to 327,290 barrels, compared to 207,922 barrels for the same period in 2006, a 57% increase, and gas sales volume increased to 348,169 MCF (thousand cubic feet), compared to 198,828 MCF for the same period in 2006, a 75% increase. For the six months ended June 30, 2007, oil sales volume increased to 609,828 barrels, compared to 375,089 barrels for the same period in 2006, a 63% increase, and gas sales volume increased to 673,104 MCF, compared to 340,864 MCF for the same period in 2006, a 97% increase. The average commodity prices received by Arena were $57.29 per barrel of oil and $ 8.24 per MCF of natural gas for the quarter ended June 30, 2007, compared to $64.37 per barrel of oil and $6.57 per MCF of natural gas for the quarter ended June 30, 2006. The average prices received for the six months ended June 30, 2007 were $54.70 per barrel of oil and $7.30 per MCF of natural gas, compared to $60.59 per barrel of oil and $6.88 per MCF of natural gas for the six month period ended June 30, 2006.
Lease operating expenses, including production taxes, for the three months ended June 30, 2007 were $9.95 per barrel of oil equivalent (“BOE”), a 9% increase from the prior year. Depreciation, depletion and amortization costs increased 18% to $6.90 per BOE. General and administrative costs, which included an $881,127 charge for stock based compensation, were $4.67 per BOE, a 46% increase. Interest expense was $727,064, or $1.89 per BOE, an 836% increase. For the six months ended June 30, 2007, lease operating expenses, including production taxes, were $9.91 per BOE, no change from the prior year. Depreciation, depletion and amortization costs were $7.36 per BOE, a 29% increase, and general and administrative costs, which included a $1,520,751 charge for stock based compensation, were $4.20 per BOE, a 23% increase. Interest expense was $1.50 per BOE, a 582% increase.
There was no outstanding debt on the Company’s $150 million bank credit facility at June 30, 2007.
Net cash flow from operations for the three and six months ended June 30, 2007 was $16,146,388, or $1.00 per fully diluted share, and $28,525,618, or $1.80 per fully diluted share, compared to net cash flow of $11,886,684, or $0.81, and $19,620,602, or $1.36 per fully diluted share for the same periods in 2006 (1).
Arena’s Chief Executive Officer, Mr. Tim Rochford, stated, “Despite some weather and power outage disruptions, we were able to successfully continue our overall development program in the second quarter, with particular emphasis on our Permian Basin properties, where we plan to begin testing some additional wells on 10 acre spacing. We drilled 28 new development wells and re-fraced 12 existing wells on our Fuhrman Mascho properties and continued infrastructure improvements and well conversions into water injectors on our East Hobbs and North Benson New Mexico assets. Our second quarter production of 385,000 BOEs was a 60% increase over the same period in 2006 and over a 14% increase from the first quarter. We completed a $100 million common stock offering eliminating all long term debt and providing sufficient capex funding, based on our current budget, into 2008. We contracted for a second company-owned drilling rig for our Fuhrman Mascho properties. We also entered into a letter of intent with a Houston-based company to produce and sell gas from the Yates formation on our Fuhrman Mascho properties beginning in late second quarter 2008. In July, we entered into an agreement for a zero-cost collar on 1,000 barrels a day of oil production with a floor of $65.00 and a ceiling of $80.50, effective August 1, 2007 and running through December 31, 2008. We are continuing to look at acquisition opportunities, primarily concentrating on those that compliment our existing properties.”
Non-GAAP Financial Measures:
Earnings for the three months ended June 30, 2007 include a non-cash charge for stock based compensation of $881,127. Earnings for the six months ended June 30, 2007 include a non-cash charge for stock based compensation of $1,520,751. Excluding such items, the Company’s earnings would have been $0.53 per diluted share for the three months ended June 30, 2007, and $0.92 for the six months ended June 30, 2007. The Company believes results excluding these items are more comparable to estimates provided by security analysts and, therefore, are useful in evaluating operational trends of the Company and its performance, compared to other similarly situated oil and gas producing companies.
1. Cash Flow from Operations is a non-GAAP financial measure that represents
“Net Cash Provided By Operating Activities” adjusted for the change in operating assets and liabilities. See below for a reconciliation of the related amounts.
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ARENA RESOURCES, INC. STATEMENTS OF OPERATIONS |
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Three Months Ended
June 30, |
Three Months Ended
June 30, |
2007
(Unaudited) |
|
2007
(Unaudited) |
2006
(Unaudited) |
Oil and Gas Revenues
Costs and Operating Expenses
Oil and gas production costs
Oil and gas production taxes
Depreciation, depletion & amortization
Accretion expense
General and administrative expense
Total Costs and Operating Expenses
Other Income (Expense)
Other financing expense
Interest income (expense)
Net Other Income (Expense)
Income Before Provision for Income Taxes
Provision for Deferred Income Taxes
Net Income
Basic Net Income Per Common Share
Diluted Net Income Per Common Share
Basic Weighted-Average
Common Shares Outstanding
Diluted Weighted-Average
Common Shares Outstanding
|
$21,620,299
2,615,533
1,216,832
2,659,712
45,265
1,799,579
8,336,921
—
(727,064)
(727,064)
12,556,314
(4,656,936)
$ 7,899,378
$ 0.52
$ 0.49
15,236,867
16,123,772
|
$14,690,068
1,290,409
909,445
1,408,999
33,638
768,484
4,410,975
—
(48,579)
(48,579)
10,230,514
(3,785,290)
$6,445,224
$ 0.47
$ 0.44
13,779,031
14,712,264
|
$38,271,600
4,976,482
2,175,483
5,317,267
88,762
3,034,365
15,592,359
—
(1,080,403)
(1,080,403)
21,598,838
7,991,570
$13,607,268
$ 0.91
$ 0.86
14,997,860
15,878,011
|
$25,070,463
2,668,828
1,606,654
2,461,461
62,942
1,472,416
8,272,301
(785,598)
(95,263)
(880,861)
15,917,301
(5,889,401)
$10,027,900
$ 0.74
$ 0.70
13,478,876
14,401,181
|
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COMPARATIVE OPERATING STATISTICS |
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Three Months Ended June 30, |
2007 |
2006 |
Change |
Net Production - BOE per day
Per BOE:
Average Sales Price
Operating Costs
DD&A
General & Administrative Expenses
Interest Expense
|
|
4,234
$ 56.11
9.95
6.90
4.67
1.89
|
2,649
$60.94
9.13
5.85
3.19
0.20
|
|
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Six Months Ended June 30, |
2007 |
2006 |
Change |
Net Production - BOE per day
Per BOE:
Average Sales Price
Operating Costs
DD&A
General & Administrative Expenses
Interest Expense
|
|
3,989
$ 53.01
9.91
7.36
4.20
1.5
|
2,386
$58.05
9.90
5.70
3.41
0.22
|
|
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CONSOLIDATED BALANCE SHEET |
| |
|
|
June 30
2007 |
December 31
2006 |
ASSETS
Current Assets
Cash
Account receivable
Joint interest billing receivable
Prepaid expenses
Total Current Assets
Property and Equipment, Using Full Cost Accounting
Oil and Gas properties subject to amortization
Equipment
Drilling rig
Office building
Office equipment
Total Property and Equipment
Less: Accumulated depreciation and amortization
Net Property and Equipment
Deferred Offering Costs
Total Assets |
|
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$ 47,957,170
8,043,435
2,867,835
329,178
59,197,618
225,126,382
60,051
3,879,948
1,941,232
126,128
231,133,741
(17,659,867)
213,473,874
$ 272,671,492 |
$ 4,919,984
6,702,677
2,949,099
102,585
14,674,345
171,708,200
59,332
1,996,899
—
120.929
173,885,360
(12,246,727)
161,638,633
$ 176,312,978 |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
Current Liabilities
Accounts payable
Accrued liabilities
Total Current Liabilities
Long-Term Liabilities
Notes payable
Notes payable to related parties
Asset retirement liability
Deferred income taxes
Total Long-Term Liabilities
Stockholders' Equity
Preferred stock - $0.001 par value; 10,000,000
shares authorized; no shares issued or outstanding
Common stock - $0.001 par value; 100,000,000
shares authorized; 14,668,787 shares and
13,099,702 shares outstanding respectively
Additional paid-in capital
Options and warrants outstanding
Retained earnings
Total Stockholders' Equity
Total Liabilities and Stockholders' Equity |
|
|
$ 9,954,441
803,838
10,758,279
—
—
2,466,231
23,507,028
25,973,259
—
17,001
183,177,620
3,853,938
48,891,395
235,939,954
$ 272,671,492
|
$ 14,367,252
628,618
14,995,870
19,300,000
400,000
2,250,332
19,322,724
41,273,056
—
14,669
81,872,268
2,872,988
35,284,127
120,044,052
$ 176,312,978
|
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|
|
Six
Months Ended
June 30
2007 |
Six
Months Ended
June 30
2006 |
Cash Flows From Operating Equities
Net income
Adjustments to reconcile net income to net cash
Provided by operating activities:
Warrants issued for financing expense
Depreciation, depletion & amortization
Provision for income taxes
Stock based compensation
Accretion of discounted liabilities
Changes in assets and liabilities:
Accounts & joint interest receivable
Other changes in deferred income taxes
Prepaid expenses
Excess tax benefits from shared-based
payment arrangements
Accounts payable & accrued liabilities
Net Cash Provided by Operating Activities
Cash Flows from Investing Activities
Purchase and development of oil and gas properties
Proceeds from sale of oil and gas properties
Purchase of building equipment
Net Cash Used in Investing Activities
Cash Flows From Financing Activities
Proceeds from issuance of common stock and
warrants, net of offering costs
Proceeds from exercise of warrants
Proceeds from exercise of options
Excess tax benefits from share-based
payment arrangements
Funds received and held for call options
Proceeds from issuance of notes payable
Payment of notes payable
Net Cash Provided by Financing Activities
Net Increase in Cash
Cash at Beginning of Period
Cash at End of Period
Supplemental Cash Flow Information
Cash paid for income taxes
Cash paid for interest
Non-Cash Investing and Financial Activities
Common stock issues for properties and equipment
Asset retirement obligation incurred in property development
Depreciation on drilling rig capitalized
as part of oil and gas properties
|
|
|
$ 13,607,268
—
5,217,267
7,991,570
1.520,751
88,762
(1,259,494)
—
(226,593)
(3,807,266)
(4,282,610)
18,949,655
(55,061,822)
1,915,640
(3,830,199)
(56,976,381)
95,399,643
270,003
1,287,000
3,807,266
—
30,700,000
(50,400,000)
81,063,912
43,037,186
4,919,984
$ 47,957,170
—
$ 1, 232,467
—
172,156
99,844
|
$ 10,027,900
785,598
2,461,461
5,889,401
393,300
62,942
(3,035,274)
(222,657)
(320,058)
(1,851,813)
604,634
14,795,434
(34,194,713)
—
(704,379)
(34,899,092)
29,858,463
150,000
640,000
1,851,813
1,272,093
11,000,000
(11,000,000
33,772,369
13,668,711
4,317,114
$ 17,985,825
$ 329,986
180,702
$3,507,872
113,807
—
|
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RECONCILIATION OF CASH FLOW FROM OPERATIONS |
Net cash provided by
operating activities
Change in operating assets
and liabilities
Cash flow from activities
Management believes that the non-GAAP measure of cash flow from operations is useful information for investors because it is used internally and is accepted by the investment community as a means of measuring the Company's ability to fund its capital program. It is also used by professional research analysts in providing investment recommendations pertaining to companies in the oil and gas exploration and production industry. |
|
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$ 18,949,655
9.575,963
$ 28,525,618
|
$ 18,949,655
9.575,963
$ 28,525,618
|
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NON-GAAP DISCLOSURE RECONCILIATION ADJUSTED EBITDA |
| |
|
|
Six Months Ended
June 30,
2007 |
Six Months Ended
June 30,
2006 |
NET INCOME
Warrants issued for financing expense
Interest expense
Income tax expense
Depreciation, depletion and amortization
Accretion of discounted liabilities
Share based compensation
ADJUSTED EBITDA |
|
|
$ 13,607,268
—
1,080.403
7,991,570
5,317,267
88,762
897,111
$ 29,606,021
|
$ 10,027,900
785,598
95,263
5,889,401
2,461,461
62,942
(95,033)
$ 19,715,865
|
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About Arena Resources, Inc.
Arena Resources, Inc. is an oil and gas exploration, development and production company with current operations in Texas, Oklahoma, Kansas and New Mexico. |
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This release contains forward-looking statements within the meaning of the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995 that involve a wide variety of risks and uncertainties, including, without limitations, statements with respect to the Company's strategy and prospects. Readers and investors are cautioned that the Company's actual results may differ materially from those described in the forward-looking statements due to a number of factors, including, but not limited to, the Company's ability to acquire productive oil and/or gas properties or to successfully drill and complete oil and/or gas wells on such properties, general economic conditions both domestically and abroad, and the conduct of business by the Company, and other factors that may be more fully described in additional documents set forth by the Company.
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For further information contact:
Bill Parsons • Vice President Investor Relations
480-947-1589 • bparsons@arenaresourcesinc.com |
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