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Arena
Resources Announces Financial and Operational Results for Fourth Quarter and Year End 2007
Tulsa, Oklahoma — March 13, 2008 —
Arena Resources, Inc. (NYSE-ARD)(“Arena”)(“Company”) announced today financial results for the fourth quarter and year ended December 31, 2007, which included the following highlights for the calendar year:
• 2007 Revenues of $100.1 million, 67% increase from 2006
• 2007 Net income of $34.4 million, 48% increase from 2006
• 2007 Net cash provided by operating activities before changes in operating assets and liabilities (a non-GAAP measure reconciled below) of $77.8 million, 66% increase from 2006
•
Oil and gas production of 1,566,627 barrels of oil equivalent (BOE), 47% increase from 2006
•
Proved oil and gas reserves of 55.4 million BOE, 32% increase from 2006 adjusting for 2007 oil and gas sales
•
PV-10 of $1.98 billion, 134% increase from 2006
Fourth Quarter 2007 Financial and Operational Results
Arena had net income of $9,430,894, an 80% increase, on oil and gas revenues of $35,086,399, a 113% increase, for the fourth quarter compared to net income of $5,233,244 on revenues of $16,496,794 for the fourth quarter ended December 31, 2006. Income attributable to common shares for the fourth quarter was $0.26 per diluted share ($0.29 per diluted share excluding $1,032,631 non-cash charge for stock based compensation) compared to $0.17 for the fourth quarter ended December 31, 2006.
Net cash flow from operations for the three months ended December 31, 2007 was $27,108,010, or $0.76 per fully diluted share, compared to net cash flow of $12,419,365, or $0.40 per fully diluted share for the same period in 2006 (1).
The revenue increase for the fourth quarter was a result of increases in production volumes due to acquisitions made in November and December, increased development activity and an increase in commodity prices. For the three months ended December 31, 2007, oil sales volume increased to 361,797 barrels, compared to 269,159 barrels for the same period in 2006, a 34% increase, and gas sales volume increased to 479,010 MCF (thousand cubic feet), compared to 372,246 MCF for the same period in 2006, a 29% increase. Total net sales production for the fourth quarter of 2007 was 441,632 BOE, as compared to 331,200 BOE for the same period in 2006, an increase of 33%. The average commodity prices received by Arena were $84.43 per barrel of oil and $9.30 per MCF of natural gas for the quarter ended December 31, 2007, compared to $52.09 per barrel of oil and $6.65 per MCF of natural gas for the quarter ended December 31, 2006. The Company’s average net daily sales production in the fourth quarter of 2007 was approximately 4,800 BOE per day, as compared to 3,600 BOE per day in 2006.
Year End 2007 Financial and Operational Results
For the year ended December 31, 2007, Arena had net income of $34,441,939, a 48% increase, on revenues of $100,089,698, a 67% increase, as compared to net income of $23,267,968 on revenues of $59,760,117 for the year ended December 31, 2006. For the year ended December 31, 2007, income attributable to common shares was $1.02 per diluted share ($1.10 per diluted share excluding $2,569,748 non-cash charge for stock based compensation) compared to $0.77 per diluted share for the year ended December 31, 2006. The increase in revenue is attributed to an increase in production, primarily due to property acquisitions, increased development activity and an increase in commodity prices. Net income for 2006 included a pre-tax non-cash charge of $785,598 for warrants issued as part of a financing in July, 2005.
Net cash flow from operations for the twelve months ended December 31, 2007 was $77,798,614, or $2.31 per fully diluted share, compared to net cash flow of $46,954,908, or $1.56 per fully diluted share for the same period in 2006 (1).
For the twelve months ended December 31, 2007, oil sales volume increased to 1,316,025 barrels, compared to 900,614 barrels for the same period in 2006, a 46% increase, and gas sales volume increased to 1,503,612 MCF, compared to 989,991 MCF for the same period in 2006, a 52% increase. Net sales production for the full year 2007 was 1,566,627 BOE, compared to 1,065,613 BOE in 2006, an increase of 47%. The average prices received for the twelve months ended December 31, 2007 were $66.82 per barrel of oil and $8.02 per MCF of natural gas, compared to $59.26 per barrel of oil and $6.46 per MCF of natural gas for the twelve month period ended December 31, 2006. The Company’s average net daily sales production for 2007 was approximately 4,290 BOE per day, as compared to 2,920 BOE per day in 2006.
Proved reserves totaled approximately 55.4 million BOE, a 29% increase over the 43.1 million BOE for the previous year, and 32% when adjusted for 2007 oil and gas sales. Future net revenues before income taxes, discounted at 10%, based on average prices of $88.89 per barrel of oil and $8.74 per Mcf of gas, were $1.982 billion at year-end 2007. This compared to $848 million, using average prices of $54.21 per barrel of oil and $5.94 per Mcf of gas, for year-end 2006.
There was outstanding debt of $35 million on the Company’s $150 million bank credit facility at December 31, 2007.
Mr. Tim Rochford, CEO stated, “2007 was very much a transition year for Arena as we added key resources to move our focus more toward development rather than acquisition activities. Although we will continue to seek acquisition opportunities, with emphasis on those that compliment our existing assets, we are now concentrating on positioning Arena to take full advantage of the development opportunities of our current leases, which have over 2,000 potential drilling locations. In 2007 we added a second company-owned drilling rig and increased our in-house staff with the addition of several key senior management personnel. This resulted in record production, revenues, earnings and cash flow. We continued to build our proven reserves with close to 45% of the increase attributable to our development activity. As we move into 2008, we have announced an initial development budget that will see the company drill over twice as many new wells as we did in 2007. We are very proud of our accomplishments to date and excited at the opportunities we see moving forward. ”
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
December 31,
|
Twelve Months Ended
December 31,
|
Oil
and Gas Revenues
Costs and Operating Expenses
Oil
& gas production costs
Oil & gas production taxes
Realized loss on oil derivative
Depreciation, depletion & amortization
Accretion expense
General & administrative expense
Stock based compensation expense
Total Costs &
Operating Expenses
Income from Operations
Other Income (Expense)
Other financing 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
Unrealized loss on oil derivatives,
net of tax
Total Other Comprehensive Income
Basic
Weighted-Average
Common
Shares Outstanding
Diluted Weighted-Average
Common
Shares Outstanding |
$35,086,399
3,554,306
1,938,782
932,361
9,611,266
55,727
1,644,577
1,663,924
19,400,943
15,685,456
—
251,539
(159,021)
92,518
15,777,974
(6,347,080)
$ 9,430,894
$ 0.28
$ 0.26
(2,801,498)
$ 6,629,396
34,157,866
35,741,301
|
$16,496,794
2,329,550
832,579
—
3,646,957
22,435
750,458
240,192
7,822,171
8,674,623
—
48,189
(213,031)
(164,842)
8,509,781
(3,276,537)
$ 5,233,244
$ 0.18
$ 0.17
—
$ 5,233,244
29,326,044
31,119,266
|
$100,089,698
11,500,461
5,655,877
932,361
17,968,062
190,904
3,674,974
4,140,747
44,063,386
56,026,312
—
884,990
(1,411,520)
(526,530)
55,499,782
(21,057,843)
$34,441,939
$ 1.07
$ 1.02
(2,801,498)
$ 31,640,441
32,071,279
33,667,929 |
$59,760,117
6,453,831
3,506,347
—
7,900,099
127,132
2,720,198
897,111
21,604,718
38,155,399
(785,598)
288,604
(413,437)
(910,431)
37,244,968
(13,977,000)
$23,267,968
$ 0.83
$ 0.77
—
$ 23,267,968
28,133,080
30,049,508 |
| COMPARATIVE
OPERATING STATISTICS |
Net
Production - BOE per day
Per BOE:
Average Sales Price
Production
Costs
Production
Taxes
DD&A
General
& Administrative Expenses
Interest
Expense (Income)
|
4,292
$ 63.89
7.34
3.61
11.47
4.99
0.34 |
2,919
$56.08
6.06
3.29
7.41
3.39
0.12 |
47%
-14%
21%
10%
55%
47%
183% |
| CONSOLIDATED
BALANCE SHEET |
|
|
|
December 31
2007 |
December
31
2006 |
ASSETS
Current Assets
Cash
Account receivable
Joint interest billing receivable
Prepaid
expenses
Total Current Assets
|
|
$ 5,213,459
20,462,160
3,355,537
133,393
29,164,549
|
$ 4,919,984
6,702,677
2,949,099
102,585
14,674,345
|
Property and Equipment,
Using Full Cost Accounting
Oil
and Gas properties subject to amortization
Drilling
rig
Land,
buildings, equipment and leasehold improvements
Total Property and Equipment
Less:
Accumulated depreciation and amortization
Net
Property and Equipment
Total Assets
|
339,887,859
6,254,737
4,512,224
350,654,820
(30,497,371)
320,157,449
$ 349,321,998
|
171,708,200
1,996,899
180,261
173,885,360
(12,246,727)
161,638,633
$ 176,312,978
|
| LIABILITIES
AND STOCKHOLDERS' EQUITY |
Current Liabilities
Accounts
payable
Income taxes
payable
Fair value of oil derivative
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 |
|
|
$ 12,525,202
539,793
4,446,822
1,704,658
19,216,475
35,000,000
—
3,397,830
33,896,728
72,294,558
|
$ 14,367,252
—
—
628,618
14,995,870
19,300,000
400,000
2,250,332
19,322,724
41,273,056
|
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; 34,278,779
shares and
29,337,574 shares outstanding respectively
Additional
paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total Stockholders'
Equity
Total
Liabilities and Stockholders' Equity |
—
34,279
190,852,118
69,726,066
(2,801,498)
257,810,965
$ 349,321,998
|
—
29,338
84,730,587
35,284,127
—
120,044,052
$ 176,312,978
|
|
|
December 31,
2007 |
December 31,
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
Gain on sale of equipment
Stock based compensation
Accretion of asset retirement obligation
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 |
$ 34,441,939
—
17,968,062
21,057,843
(881)
4.140,747
190,904
(14,165,921)
—
(30,808)
(4,298,722)
(814,999)
58,488,164
|
$ 23,267,968
785,598
7,900,099
13,977,000
—
897,111
127,132
(6,330,466)
(320,058)
(67,149)
(1,851,815)
8,729,479
47,114,899
|
Cash Flows from Investing Activities
Proceeds from sale of property and equipment
Proceeds from sale of oil and gas properties
Purchase and development of
oil and gas properties
Purchase of buildings, machinery and office equipment
Net Cash Used in Investing Activities |
7,000
1,915,640
(168,582,803)
(8,615,501)
(87,703,736)
|
—
—
(97,576,774)
(672,130)
(62,274,120)
|
Cash Flows From Financing Activities
Proceeds from issuance
of common stock and
warrants, net of offering costs
Proceeds from exercise
of warrants, net of offering costs
Proceeds from exercise
of options
Excess tax benefits from share-based
payment arrangements
Funds received and held for
call options
Funds paid from funds held for
call options
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
Asset retirement obligation incurred
in property development
|
95,089,458
540,295
1,852,500
4,298,722
—
—
65,700,000
(50,400,000)
117,080,975
293,475
4,919,984
$ 5,213,459
—
$ 1, 463,328
$ 204,750
1,001,613
|
29,788,879
150,000
640,000
1,851,813
1,272,093
(1,265,912)
30,300,000
(11,000,000)
51,736,875
602,870
4,317,114
$ 4,919,984
$ 329,986
240,815
$3,933,926
607,853 |
| 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.
|
$ 58,488,164
19.310,450
$ 77,798,614
|
$ 47,114,899
(159,991)
$ 46,954,908
|
| NON-GAAP DISCLOSURE RECONCILIATION ADJUSTED EBITDA |
|
NET INCOME
Interest income
Interest expense
Income tax expense
Depreciation, depletion and amortization
Accretion of discounted liabilities
Other financing expense
Stock based compensation
ADJUSTED EBITDA
|
December 31,
2007
$ 34,441,939
(884.990)
1,411,520
21,057,843
17,968,062
190,904
—
$ 4,140,747
$ 78,326,025
|
December 31,
2006
$ 23,267,968
(288,604)
413,437
13,977,000
7,900,099
127,132
785,598
897,111
$ 47,079,741
|
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
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