Arena Resources Announces Second Quarter and
Six Month 2009 Financial and Operational Results
Tulsa, Oklahoma — August 7, 2009 — Arena Resources, Inc. (NYSE-ARD)(“Arena”)(“Company”) announced today financial results for the three months and six months ended June 30, 2009.
Three Months Ended June 30, 2009
For the three month period ended June 30, 2009, Arena had oil and gas revenues of $27,636,695 compared to $62,159,281 for the quarter ended June 30, 2008, a 56% decrease. Net income was $14,436,066 or $0.37 per fully diluted share, compared to net income of $24,794,349 or $0.67 per fully diluted share, for the same period in 2008, a 42% decrease.
The revenue decrease for the three month period ended June 30, 2009 was due to a decrease in oil production volumes and significant decreases in commodity prices. Arena’s total sales production for the quarter ended June 30, 2009 was 547,706 BOEs (Barrel of Oil Equivalents). This represents a 2% decrease over the same three month period in 2008 and a 4% decrease over the first quarter of 2009. For the three months ended June 30, 2009, oil sales volume decreased to 461,491 barrels, compared to 477,430 barrels for the same period in 2008, a 3% decrease, and gas sales volume increased to 517,289 MCF (thousand cubic feet), compared to 486,327 MCF for the same period in 2008, a 6% increase. The average commodity prices received by Arena were $55.23 per barrel of oil and $4.16 per MCF of natural gas for the quarter ended June 30, 2009, compared to $119.23 per barrel of oil and $10.77 per MCF of natural gas for the quarter ended June 30, 2008.
Lease operating expenses for the three months ended June 30, 2009 were $5.97 per barrel of oil equivalent (“BOE”), a 22% decrease from the prior year. Production taxes decreased 50% to $2.65 per BOE. Depreciation, depletion and amortization costs remained virtually unchanged at $13.53 per BOE. General and administrative costs, which included a $1,220,622 charge for stock based compensation, were $6.33 per BOE, a 3% decrease. General and administrative costs in the quarter also included non-recurring costs of approximately $800,000 for severance pay and franchise taxes. Net interest income was $209,994 or $0.38 per BOE, a 176% increase.
Six Months Ended June 30, 2009
For the six month period ended June 30, 2009, the Company reported oil and gas revenues of $47,829,855 compared to oil and gas revenues of $107,471,673 for the six month period ended June 30, 2008, a 55% decrease. Net income for the six month period ended June 30, 2009 was $20,901,514 or $0.54 per fully diluted share, compared to net income of $43,112,744 or $1.18 per fully diluted share, for the same period in 2008, a 52% decrease.
For the six months ended June 30, 2009, oil sales volume increased to 950,740 barrels compared to 930,486 barrels for the same period in 2008, a 2% increase. Gas sales volume increased to 990,112 MCF compared to 870,241 MCF for the same period in 2008, a 14% increase. The average prices received for the six months ended June 30, 2009 were $45.79 per barrel of oil and $4.34 per MCF of natural gas compared to $106.02 per barrel of oil and $10.14 per MCF of natural gas for the six month period ended June 30, 2008.
For the six months ended June 30, 2009, lease operating expenses were unchanged at $6.70 per BOE. Production taxes were $2.29 per BOE, a 54% decrease. Depreciation, depletion and amortization costs were $13.12 per BOE, a 3% increase, and general and administrative costs, which included a $2,549,939 charge for stock based compensation, were $5.51 per BOE, a 6% decrease. Net interest income was $0.43 per BOE, a 154% increase.
Net cash flow from operations for the three and six months ended June 30, 2009 was $31,639,033 or $0.81 per fully diluted share, and $50,559,141 or $1.30 per fully diluted share. This compares to net cash flow of
$48,493,997 or $1.31 and $85,539,984 or $2.33 per fully diluted share for the same periods in 2008 (1).
2nd Quarter Operations:
During the second quarter of 2009, the Company drilled 33 new San Andres zone development wells at its Fuhrman-Mascho property in Andrews County, Texas. Twenty-one of the wells were completed and producing as of June 30, 2009, while the remaining twelve were in various stages of completion. Additionally, seven development wells which were drilled in the first quarter of 2009 were successfully completed and placed in production. As of June 30, 2009, the Company had drilled 530 new San Andres development wells on this lease since initiating its developmental drilling program in mid-April, 2005, and continued our 100% development drilling success rate. In mid-May, management activated its second Company owned drilling rig and now has two rigs operating full-time at its Fuhrman-Mascho property. It is estimated that these rigs will drill approximately 125 new San Andres zone development wells in 2009. The Yates gas pipeline construction was completed and tested in June and the Company has commenced initial production focusing on the re-completion of existing, idle well bores.
Arena’s President and Chief Executive Officer, Mr. Phil Terry, stated, “We drilled 33 new development wells on our Fuhrman Mascho properties. We now have our two drilling rigs operating at the Fuhrman- Mascho and are currently drilling our 546th new well since April, 2005. Each rig is drilling a new well every four to five days. We are currently concentrating our drilling activities in two specific areas, the “Grayburg Fairway” and South Fuhrman Mascho, which have consistently shown to produce better than average results. With higher oil prices we are now examining our list of refrac candidates in anticipation of reinstating our successful refrac program in the third and fourth quarters of 2009. We are moving ahead with plans to build gathering systems to connect our Fuhrman-Mascho oil production into an existing oil pipeline prior to year-end. The oil gathering and pipeline systems will immediately save us $1.00 per barrel in transportation charges alone. With the completion of the Yates pipeline, we have started producing and selling Yates gas. Due to current depressed gas prices, we are focusing on the recompletion of existing, idle well bores. We have experienced a dramatic drop in drilling and service-related costs since mid-2008 and continue to work closely with our vendors to further reduce costs and maintain those reductions. We continue to look at acquisition opportunities, concentrating on Permian Basin properties.”
Derivative Update
Effective June 1, 2009, the Company monetized its only hedging component, a costless collar, on 1,000 barrels of oil per day with a $100.00 floor and $197.00 ceiling and a remaining period to December 31, 2009. This resulted in additional cash to the Company of approximately $8.0 million. In addition, the Company implemented a new hedge, a costless collar, on 3,000 barrels of oil per day with a $50.00 floor and $72.60 ceiling for the period June 1, 2009 to December 31, 2009.
Capital Expenditures
In May the Board of Directors of Arena approved a $20 million increase in its capital expenditure budget (“CAPEX”) for 2009 to $85 million. The additional funds are directly related to increased activity at the Company’s Fuhrman-Mascho property in Andrews County, Texas. Management placed its second company-owned drilling rig in operation in mid-May at Fuhrman-Mascho. During 2008, with commodity prices at their peak, the Company had as many as five rigs active at the Fuhrman-Mascho. The additional funds will be used to increase the number of new development wells to be drilled on this property in 2009 from approximately 80 to an estimated 125.
Credit Facility
Effective as of June 30, 2009, Arena entered into a new agreement that provides for a credit facility of $150 million with a borrowing base of $75 million. The borrowing base can be expanded to a total of $150 million upon approval of the credit facility participants. The new facility has an interest rate grid with a range of LIBOR plus 2.25% to 3.25%, depending upon the Company’s level of utilization of the credit facility with the total interest rate to be charged being no less than 4.00%. As of June 30, 2009, the Company was in compliance with all covenants and did not have any amount outstanding under this credit facility.
Non-GAAP Financial Measures:
Earnings for the three months and six months ended June 30, 2009 include non-cash charges for stock based compensation of $1,220,622 and $2,549,939 respectively. Excluding such items, the Company’s earnings would have been $0.39 per diluted share for the three months ended June 30, 2009, and $0.58 for the six months ended June 30, 2009. 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
June 30 |
Six Months Ended
June 30 |
2009
(Unaudited)
|
|
2009
(Unaudited)
|
2008
(Unaudited)
|
Oil and Gas Revenues
Costs and Operating Expenses
Oil & gas production costs
Oil & gas production taxes
Realized loss (gain) 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 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 Comprehensive Income
Basic Weighted-Average
Common Shares Outstanding
Diluted Weighted-Average
Common Shares Outstanding
|
$27,974,286
3,271,063
1,451,901
(10,758,797)
7,409,024
96,940
2,243,488
1,220,622
4,934,241
209,994
—
209,994
22,912,448
(8,476,382)
$ 14,436,066
$ 0.38
$ 0.37
(7,306,238)
(44,281)
$7,085,547
38,246,241
38,930,370
|
$62,159,281
4,277,676
2,983,838
3,958,099
7,574,790
74,192
2,164,000
1,488,905
22,521,500
248,705
(530,376)
(281,671)
39,356,110
(14,561,761)
$ 24,794,349
$ 0.69
$ 0.67
1,154,450
(3,604,271)
$22,344,528
35,865,694
36,974,979
|
$47,829,855
7,477,847
2,550,240
(15,807,007)
14,640,505
191,690
3,588,940
2,549,939
15,129,154
476,306
—
476,306
33,177,007
12,275,493
$ 20,901,514
$ 0.55
$ 0.54
(10,222,546)
(43,336)
$10,644,632
38,228,314
38,860,345
|
$107,471,673
7,189,601
5,313,588
5,546,539
13,714,723
142,617
3,026,171
3,249,717
38,182,956
289,666
(1,145,456)
(855,790)
68,432,927
(25,320,183)
$ 43,112,744
$ 1.22
$ 1.18
2,009,640
(4,843,580)
$40,278,804
35,379,132
36,686,173
|
| |
COMPARATIVE OPERATING STATISTICS |
| |
Three Months Ended June 30, |
2009 |
2008 |
Change |
Net Production - BOE per day
Per BOE:
Average Sales Price
Lease Operating Expenses
Production Taxes
DD&A
General & Administrative Expenses
Stock based compensation
Interest Expense
|
|
6,019
50.46
5.97
2.65
13.53
4.10
2.23
(0.38)
|
6,137
111.30
7.66
5.34
13.56
3.87
2.67
0.50
|
-2%
-55%
-22%
-50%
0%
6%
-16%
-176%
|
| |
Six Months Ended June 30, |
2009 |
2008 |
Change |
Net Production - BOE per day
Per BOE:
Average Sales Price
Lease Operating Expenses
Production Taxes
DD&A
General & Administrative Expenses
Stock based compensation
Interest Expense
|
|
6,164
42.87
6.70
2.29
13.12
3.22
2.29
(0.43)
|
5,909
99.92
6.69
4.94
12.75
2.82
3.02
0.80
|
4%
-57%
0%
-54%
3%
14%
-24%
-154%
|
| |
CONSOLIDATED BALANCE SHEET |
| |
|
|
June 30
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 |
|
|
$68,055,740
9,936,259
2,524,424
—
—
743,274
81,259,697
703
591,176,235
959,366
7,235,008
5,828,348
605,199,425
(75,801,176)
529,398,249
$ 610,657,946 |
$ 58,489,574
8,637,308
2,836,948
2,508,396
16,210,478
847,433
89,530,137
548,714,235
1,670,067
6,899,433
5,799,045
563,082,780
(60,928,142)
502,154,775
$ 591,684,775
|
| |
LIABILITIES AND STOCKHOLDERS' EQUITY |
Current Liabilities
Accounts payable
Deferred income taxes
Fair value of oil derivative
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
38,352,551 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 |
|
|
$ 10,210,043
—
70,287
1,332,468
11,612,798
5,601,912
96,831,537
102,433,449
—
38,352
322,372,847
174,244,781
(44,281)
496,611,699
$ 610,657,946
|
$ 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
|
| |
|
|
Six Months Ended
June 30.
2009 |
Six Months Ended
June 30,
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, joint interest and oil derivative 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 and equipment
Net Cash Used in Investing Activities
Cash Flows From Financing Activities
Proceeds from issuance of common stock, net of offering costs
Proceeds from exercise of warrants
Proceeds from exercise of options
Proceeds from issuance of notes paayable
Payment of notes payable
Net Cash Provided by Financing Activities
Net Increase (Decrease) 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 |
|
|
$ 20,901,514
14,640,505
12,275,493
2.549,939
191,690
1,521,969
—
104,159
(2,200,528)
49,984,741
(38,379,028)
(2,796,336)
(1,931,517)
(41,540,242)
—
406,327
715,340
—
—
1,121,667
9,566,186
58,489,574
$ 68,055,740
—
—
343,874
232,529
3,507,037
|
$ 43,112,744
13,714,723
25,320,183
3,249,717
142,617
(609,124)
(540,000)
(279,098)
3,226,633
87,338,395
(89,000,997)
(1,153,515)
—
(90,154,512)
116,149,336
57,557
2,457,860
11,000,000
(46,000,000)
83,664,753)
80,848,636
5,213,459
$ 86,062,095
$540,000
1,280,122
676,797
319,784
—
|
| |
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. |
|
|
$ 49,984,741
574,400
$ 50,559,141
|
$ 87,338,395
(1,798,411)
$ 85,539,984
|
| |
NON-GAAP DISCLOSURE RECONCILIATION ADJUSTED EBITDA |
| |
|
|
Six Months Ended
June 30,
2009 |
Six Months Ended
June 30,
2008 |
NET INCOME
Interest expense
Income tax expense
Depreciation, depletion and amortization
Accretion of discounted liabilities
Stock based compensation
ADJUSTED EBITDA |
|
|
$ 20,901,514
(476,306)
12,275,493
14,640,505
191,690
2,549,939
$ 50,082,835
|
$ 43,112,744
855,790
25,320,183
13,714,723
142,617
3,249,717
$ 86,395,774
|
| |
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 |
|
| |
|
