Arena Resources Announces Financial and Operational Results for First Quarter 2009
Tulsa, Oklahoma — May 8, 2009 — Arena Resources, Inc. (NYSE-ARD)(“Arena”)(“Company”) announced today financial and operational results for the first quarter ended March 31, 2009. Oil and gas revenues were $20,193,160 compared to $45,312,392 for the quarter ended March 31, 2008, and net income was $6,465,449 or $0.17 per diluted share, compared to net income of $18,318,395 or $0.51 per diluted share, for the same period in 2008.
The reduced revenue and net income were due to significant decreases in commodity prices between periods, partially offset by higher production. Arena’s total production for the quarter ended March 31, 2009 was 568,053 BOEs (Barrel of oil equivalents). This represents a 10% increase over the same three month period in 2008. For the three months ended March 31, 2009, oil sales volume increased to 489,249 barrels, compared to 453,056 barrels for the same period in 2008, a 8% increase and gas sales volume increased to 472,823 MCF (thousand cubic feet), compared to 383,914 MCF for the same period in 2008, an 23% increase. The average commodity prices received by Arena were $36.89 per barrel of oil, a 60% decrease from $92.10 per barrel of oil received for the quarter ended March 31, 2008, and $4.54 per MCF of natural gas, a 51% decrease from the $9.34 per MCF of natural gas received for the same period in 2008.
Lease operating expenses, including production taxes, for the three months ended March 31, 2009 were $9.34 per BOE, an 8% decrease from the prior year. Depreciation, depletion and amortization costs increased 7% to $12.73 per BOE. General and administrative costs, which included a $1,329,317 charge for stock based compensation, were $4.71 per BOE, a 7% decrease, as compared to $5.08 per BOE in 2008, which included a $1,760,812 charge for stock based compensation.
Net cash flow from operations for the three months ended March 31, 2009 was $18,920,108 or $0.49 per diluted share, compared to net cash flow of $37,045,987 or $1.02 per diluted share for the same period in 2008 (1).
Arena also announced that its current credit facility had been extended for 90 days effective April 15, 2009. The Company chose to decrease the borrowing base of the extended facility to $75 million while finalizing a new facility which is expected to be in place within 30 days. The new facility is expected to have an immediate borrowing base of $75 million with an accordion feature which would allow for expansion of the borrowing base to $150 million. Mr. Tim Rochford, Chairman of the Board, stated, “Based on our increased proven reserve base for 2008, the Company received term sheets from several lending institutions proposing to expand our current credit facility from $150 million to $200 million. Management chose not to accept any of the proposed facilities because of the associated fees and expenses. We felt that in this current economic environment it would be prudent to choose a more flexible structure which would allow us to maintain the ability to be proactive in seeking acquisition opportunities while being sensitive to the overall financial costs and our cash position, which currently exceeds $50 million.”
Operations:
During the first quarter of 2009, the Company drilled 20 new San Andres zone development wells at its Fuhrman-Mascho property in Andrews County, Texas. Thirteen of the wells were completed and producing as of March 31, 2009, while the remaining seven were in various stages of completion. Additionally, seven development wells which were drilled in the fourth quarter of 2008 were successfully completed and placed in production. The Company has now drilled 497 new San Andres development wells on this lease since initiating its developmental drilling program in mid-April, 2005, and continued its 100% development drilling success rate. The Company had one drilling rig in operation, a Company owned rig and it is estimated that this rig will drill a total of 80 San Andres zone development wells in 2009. The Company drilled four Yates gas wells late in 2008 which were completed in the first quarter of 2009. Two of the wells have been completed and are now producing. The wells initial potentials and production are encouraging and consistent with the Company’s pre-drilling expectations. The other two wells are now being tested. The Company continued to test and evaluate existing well bores in preparation of the Yates pipeline completion.
Arena’s President and Chief Executive Officer, Mr. Phil Terry, stated, “The Company is committed to funding property development and operations with existing cash flow. We were successful in this effort in the first quarter of 2009. We will continue to concentrate our Fuhrman-Mascho drilling in areas that offer the greatest production and reserves potential. We have also been successful in reducing drilling and completion costs associated with our Fuhrman-Mascho development program. The cost of drilling and completing a well at Fuhrman-Mascho is now under $480,000 compared to $647,000 in the fourth quarter of 2008. First quarter sales were adversely affected due to the reduction of drilling activity. First quarter sales were also significantly reduced due to our Fuhrman-Mascho natural gas purchaser repeatedly shutting in their system due to mechanical failure and maintenance requirements. We experienced 64 days affecting all or portions of our Fuhrman-Mascho operation in the first quarter. We estimate that over 20,000 BOE sales were lost as a result of the system failures. We are currently accelerating our activity related to the Yates gas development program. The pipeline is almost complete and should be fully operational by the end of May. We anticipate commencing our Yates production in early June, approximately 30 days ahead of our original schedule. Yesterday, we announced a restructured credit facility which is expected to be in place within 30 days and the acceleration of our San Andres zone development program by placing our second Company owned drilling rig into operation at our Fuhrman-Mascho. It is anticipated to be in operation by early June. This will increase the number of new development wells to be drilled on this property from approximately 80 to an estimated 120. We also announced the monetization of our current hedging component and the implementation of a new one, both effective June 1. By taking these steps, we will have approximately $65 million in cash, a restructured credit facility with an immediate borrowing base of $75 million and an accordion feature which could provide up to an additional $75 million if necessary. We are confident in our ability to continue to manage our growth within anticipated cash flow while positioned to take advantage of potential acquisition opportunities.”
Non-GAAP Financial Measures:
Earnings for the first quarter 2009 include a non-cash charge for stock based compensation of $1,329,317. Excluding such item, the Company’s earnings would have been $0.20 per diluted share. 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.
| |
ARENA RESOURCES, INC. STATEMENTS OF OPERATIONS |
| |
|
Three Months Ended
March 31 |
|
|
2009
|
2008
|
Oil and Gas Revenues
Costs and Operating Expenses
Oil & gas production costs
Oil & gas production taxes
Realized (gain) loss on oil derivatives
Depreciation, depletion & amortization
Accretion expense
General & administrative expense
Stock based compensation expense
Total Costs and Operating Expenses
Other Income (Expense)
Interest income
Interest 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
Other Comprehensive Income (Loss)
Realized loss (gain) on hedge derivative contract settlements
reclassified from other comprehensive (loss) income
Change in unrealized deferred hedging gains (losses)
Total Other Comprehensive Income
Basic Weighted-Average
Common Shares Outstanding
Diluted Weighted-Average
Common Shares Outstanding
|
|
|
$20,193,160
4,206,783
1,098,339
(5,111,210)
7,231,481
94,750
1,345,452
1,329,317
10,194,912
266,312
—
266,312
10,264,560
(3,799,111)
$ 6,465,449
$ 0.17
$ 0.17
(2,916,308)
9,945
$3,559,086
38,210,187
38,793,449
|
$45,312,392
11,500,461
5,655,877
1,588,440
6,139,933
68,425
862,171
1,760,812
15,661,456
40,961
(615,080)
(574,119)
29,076,817
(10,758,422)
$ 18,318,395
$ 0.52
$ 0.51
855,190
(1,239,309)
$17,934,276
34,892,570
36,229,426
|
| |
COMPARATIVE OPERATING STATISTICS |
| |
Three Months Ended March 31 |
2009 |
2008 |
Change |
Net Production - BOE per day
Per BOE:
Average Sales Price
Operating Costs
LOE
Production tax
DD&A
General & Administrative Expenses
G & A
Stock based compensation
Interest Expense (Income)
|
|
6,312
$35.55
7.41
1.93
12.73
2.37
2.34
(0.47)
|
5,682
$87.64
5.63
4.51
11.88
1.67
3.41
1.11
|
11%
-59%
32%
-57%
7%
42%
-31%
-142%
|
| |
CONSOLIDATED BALANCE SHEET |
| |
|
|
March 31
2009 |
December 31
2008 |
ASSETS
Current Assets
Cash
Account receivable
Joint interest billing receivable
Receivable from oil derivative
Fair value of oil derivative
Prepaid expenses
Total Current Assets
Property and Equipment, Using Full Cost Accounting
Oil and Gas properties subject to amortization
Inventory for property development
Drilling rigs
Land, buildings, equipment and leasehold improvements
Total Property and Equipment
Less: Accumulated depreciation and amortization
Net Property and Equipment
Total Assets |
|
|
$52,403,274
7,723,854
2,794,860
1,610,078
11,597,203
699,043
76,828,312
565,702,229
2,002,021
7,142,008
5,799,045
580,645,303
(68,270,298)
512,375,005
$ 589,203,317
|
$ 58,489,574
8,637,308
2,836,948
2,508,396
16,210,478
847,433
89,530,137
339,887,859
1,670,067
6,899,433
5,799,045
563,082,780
(60,928,142)
502,154,638
$ 591,684,775
|
| |
LIABILITIES AND STOCKHOLDERS' EQUITY |
| |
|
|
March 31
2009 |
December 31
2008 |
Current Liabilities
Accounts payable
Deferred income taxes
Accrued liabilities
Total Current Liabilities
Long-Term Liabilities
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
38,210,187 shares and 38,210,187 shares outstanding respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total Stockholders' Equity
Total Liabilities and Stockholders' Equity |
|
|
$ 2,875,823
4,290,965
1,176,174
8,342,962
5,295,330
88,381,161
93,676,491
—
38,210
320,030,700
159,808,716
7,306,238
487,183,864
$ 589,203,317
|
$ 12,877,084
6,046,508
865,955
19,789,547
5,066,348
84,533,419
89,599,767
—
38,210
318,701,383
153,343,267
10,212,601
482,295,461
$ 591,684,775
|
| |
|
|
Three Months
Ended
March 31
2009 |
Three Months
Ended
March 31
2008 |
Cash Flows From Operating Activities
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion & amortization
Provision for income taxes
Stock based compensation
Accretion of asset retirement obligation
Changes in assets and liabilities:
Accounts and joint interest receivable
Other changes in deferred income taxes
Prepaid expenses
Accounts payable & accrued liabilities
Net Cash Provided by Operating Activities
Cash Flows from Investing Activities
Purchase and development of oil and gas properties
Purchase of inventory for property development
Purchase of buildings, drilling rigs & equipment
Net Cash Used in Investing Activities
Cash Flows from Financing Activities
Cash paid for offering costs
Proceeds from exercise of warrants
Proceeds from exercise of options
Proceeds from issuance 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 Financing Activities
Asset retirement obligation incurred in property development
Depreciation on drilling rigs capitalized as oil and gas properties
Use of inventory in property development |
|
|
$ 6,465,449
7,231,481
3,799,111
1,329,317
94,750
1,853,860
—
148,390
(9,691,042)
11,231,316
(15,256,515)
(1,818,526)
(242,575)
(17,317,616)
—
—
—
—
—
(6,086,300)
58,489,574
$ 58,489,574
—
—
134,232
110,675
1,486,572
|
$ 18,318,395
6,139,933
10,758,422
1,760,812
68,425
(2,679,514)
(540,000)
104,348
1,549,185
35,480,006
(40,550,652)
—
(517,469)
(41,068,121)
(5,000)
38,844
1,528,000
5,500,000
7,061,844
1,473,729
5,213,459
$ 6,687,188
$ 540,000
482,599
252,467
159,187
—
|
| |
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. |
|
|
$ 11,231,316
7,688,792
$ 18,920,108
|
$ 35,480,066
1,565,981
$ 37,045,987
|
| |
NON-GAAP DISCLOSURE RECONCILIATION ADJUSTED EBITDA |
| |
|
|
March 31,
2009 |
March 31,
2008 |
NET INCOME
Interest (Income) / expense
Income tax expense
Depreciation, depletion and amortization
Accretion of asset retirement obligation
Stock based compensation
ADJUSTED EBITDA |
|
|
$ 83,617,201
(266,312)
3,799,111
7,231,481
94,750
1,329,317
$ 18,653,796
|
$ 34,411,939
574,119
10,758,422
6,139,933
68,425
1,760,812
$ 37,620,106
|
| |
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. |
|
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.
|
| |
For further information contact:
Bill Parsons • Vice President Investor Relations
480-947-1589 • bparsons@arenaresourcesinc.com |
|
| |
|
