| |
Arena
Resources Announces Record Second Quarter
and Six Month 2008 Financial and Operating Results
188% Increase in Revenue For The Three Months to Record $62.15 Million
214% Increase in Earnings For The Three Months to Record $24.79 Million
Tulsa, Oklahoma — August 7, 2008 —
Arena Resources, Inc. (NYSE-ARD)(“Arena”)(“Company”) announced today financial results for the three months and six months ended June 30, 2008. For the three month period ended June 30, 2008, Arena had oil and gas revenues of $62,159,281, compared to $21,620,299 for the quarter ended June 30, 2007, a 188% increase and net income of $24,794,349, or $0.67 per fully diluted share, compared to net income of $7,899,378, or $0.24 per fully diluted share, for the same period in 2007, a 214% increase. For the six month period ended June 30, 2008, the Company reported oil and gas revenues of $107,471,673, compared to oil and gas revenues of $38,271,600 for the six month period ended June 30, 2007, a 181% increase. Net income for the six month period ended June 30, 2008 was $43,112,744, or $1.18 per fully diluted share, compared to net income of $13,607,268, or $0.43 per fully diluted share, for the same period in 2007, a 217% increase.
The revenue increase was due to increases in production volumes, primarily due to development activity, and increases in commodity prices. Arena’s total sales production for the quarter ended June 30, 2008 was 558,484 BOEs (Barrel of Oil Equivalents). This represents a 45% increase over the same three month period in 2007 and an 8% increase over the first quarter of 2008. For the three months ended June 30, 2008, oil sales volume increased to 477,430 barrels, compared to 327,290 barrels for the same period in 2007, a 46% increase, and gas sales volume increased to 486,327 MCF (thousand cubic feet), compared to 348,169 MCF for the same period in 2007, a 40% increase. For the six months ended June 30, 2008, oil sales volume increased to 930,486 barrels, compared to 609,828 barrels for the same period in 2007, a 53% increase, and gas sales volume increased to 870,241 MCF, compared to 673,104 MCF for the same period in 2007, a 29% increase. The average commodity prices received by Arena were $119.23 per barrel of oil and $10.77 per MCF of natural gas for the quarter ended June 30, 2008, compared to $57.29 per barrel of oil and $8.24 per MCF of natural gas for the quarter ended June 30, 2007. The average prices received for the six months ended June 30, 2008 were $106.02 per barrel of oil and $10.14 per MCF of natural gas, compared to $54.70 per barrel of oil and $7.30 per MCF of natural gas for the six month period ended June 30, 2007.
Lease operating expenses for the three months ended June 30, 2008 were $7.66 per barrel of oil equivalent (“BOE”), a 13% increase from the prior year. Production taxes increased 69% to $5.34 per BOE. Depreciation, depletion and amortization costs increased 97% to $13.56 per BOE. General and administrative costs, which included a $1,488,905 charge for stock based compensation, were $6.54 per BOE, a 40% increase. General and administrative costs in the quarter also included such non-recurring costs as financial and reserve audit fees and $500,000 for franchise taxes. Net interest expense was $281,671 or $0.50 per BOE, a 74% decrease. For the six months ended June 30, 2008, lease operating expenses were $6.69 per BOE, a 3% decrease. Production taxes were $4.94 per BOE, a 64% increase. Depreciation, depletion and amortization costs were $12.75 per BOE, a 73% increase, and general and administrative costs, which included a $3,249,717 charge for stock based compensation, were $5.84 per BOE, a 39% increase. Net interest expense was $0.80 per BOE, a 47% decrease.
There was no outstanding debt on the Company’s $150 million bank credit facility at June 30, 2008. Commencing August 1, 2008, the Company put in place a “costless collar” on 518,000 barrels of oil with a $100.00 floor and $197.00 ceiling expiring December 31, 2009.
Net cash flow from operations for the three and six months ended June 30, 2008 was $48,493,997, or $1.31 per fully diluted share, and $85,539,984, or $2.33 per fully diluted share, compared to net cash flow of
$16,146,388, or $0.50, and $28,525,618, or $0.90 per fully diluted share for the same periods in 2007 (1). This represents increases of 162% and 159% respectively.
Arena’s Chief Executive Officer, Mr. Phil Terry, stated, “We drilled 52 new development wells and re-fraced twelve more existing wells on our Fuhrman Mascho properties. We now have four drilling rigs operating at the Fuhrman Mascho and are drilling our 386th new well since April, 2005. In June we completed an equity offering which has allowed us to eliminate our long-term debt, bring in the fourth drilling rig at the Fuhrman Mascho, close a $10.2 million acquisition in Lea County, New Mexico and increase our 2008 capital expenditure budget to $248 million. For the first six months, operations, excluding any acquisitions, were cash flow positive. With the increased budget, we don’t anticipate that to continue in the second half of 2008 as we accelerate the development of all our assets, having as many as eight to ten drilling rigs operating and drilling approximately 200 new wells company-wide. We continue to pressure- check existing, abandoned well bores in preparation of the arrival of the new Yates gas pipeline, which is expected in the second quarter of 2009. Right-of-ways are being secured and pipe has been ordered. We continue to look at acquisition opportunities, concentrating on those that compliment our existing properties.”
Non-GAAP Financial Measures:
Earnings for the three months and six months ended June 30, 2008 include non-cash charges for stock based compensation of $1,488,905 and $3,249,717, respectively. Excluding such items, the Company’s earnings would have been $0.71 per diluted share for the three months ended June 30, 2008, and $1.26 for the six months ended June 30, 2008. 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,
2008
(Unaudited) |
2007
(Unaudited) |
|
Six Months Ended
June 30,
2008
(Unaudited) |
2007
(Unaudited) |
|
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
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
Basic
Weighted-Average
Common
Shares Outstanding
Diluted Weighted-Average
Common
Shares Outstanding |
$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)
38,356,110
(14,561,761)
$ 24,794,349
$ 0.69
$ 0.67
35,865,694
36,974,979
|
$21,620,299
2,615,533
1,216,832
—
2,659,712
45,265
918,452
881,127
8,336,921
101,236
(828,300)
(727,064)
12,556,314
(4,656,936)
$ 7,899,378
$ 0.26
$ 0.24
30,473,734
32,247,544 |
$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
35,379,132
36,686,173 |
$38,271,600
4,976,482
2,175,483
—
5,317,267
88,762
1,513,614
1,520,751
15,592,359
152,064
(1,232,467)
(1,080,403)
21,598,838
7,991,570
$ 13,607,268
$ 0.45
$ 0.43
29,995,720
31,756,022 |
| COMPARATIVE
OPERATING STATISTICS |
|
Three Months Ended June 30, |
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
|
6,137
111.30
7.66
5.34
13.56
3.87
2.67
0.50 |
4,234
$56.11
6.79
3.16
6.90
2.38
2.29
1.89 |
45%
98%
13%
69%
97%
63%
17%
-74% |
| |
Six Months Ended June 30, |
| |
2008 |
2007 |
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 |
5,909
99.82
6.69
4.94
12.75
2.82
3.02
0.80 |
3,989
$53.01
6.90
3.01
7.36
2.09
2.11
1.50 |
48%
88%
-3%
64%
73%
35%
43%
-47% |
|
| CONSOLIDATED
BALANCE SHEET |
|
|
June 30
2008 |
December
31
2007 |
ASSETS
Current Assets
Cash
Account receivable
Joint interest billing receivable
Prepaid
expenses
Total Current Assets
|
$86,062,095
21,488,493
2,938,328
412,491
110,901,407
|
$ 5,213,459
20,462,160
3,355,537
133,393
29,164,549
|
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
|
429,885,437
6,423,897
5,496,579
441,805,913
(44,531,878)
397,274,035
$ 508,175,442
|
339,887,859
6,254,737
4,512,224
350,654,820
(30,497,371)
320,157,449
$ 349,321,998
|
| 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
Asset
retirement liability
Deferred
income taxes
Total Long-Term Liabilities |
$ 12,543,693
—
8,944,805
5,013,217
26,501,715
—
4,116,827
57,552,450
61,669,277
|
$ 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
|
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; 35,107,411
shares and
34,278,779 shares outstanding respectively
Additional
paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total Stockholders'
Equity
Total
Liabilities and Stockholders' Equity |
—
37,707
312,763,160
112,838,810
(5,635,227)
420,004,450
$ 508,175,442
|
—
34,279
190,852,118
69,726,066
(2,801,498)
257,810,965
$ 349,321,998
|
|
|
June30,
2008 |
June30,
2007 |
Cash Flows From Operating Equities
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 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 |
$ 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
|
$ 13,607,268
5,317,267
7,991,570
1,520,751
88,762
(1,259,494)
—
(226,593)
(3,807,266)
(4,282,610)
18,949,655
|
Cash Flows from Investing Activities
Purchase and development of
oil and gas properties
Purchase of buildings, drilling rigs & equipment
Proceeds from sale of oil and gas properties
Net Cash Used in Investing Activities |
(89,000,997)
(1,153,515)
—
(90,154,512)
|
(55,061,822)
(3,830,199)
1,915,640
(56,976,381)
|
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
Excess tax benefits from share-based
payment arrangements
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
Asset retirement obligation incurred
in property development
Depreciation on drilling rigs capitalized as
oil and gas properties
|
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
|
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
|
| 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.
|
$ 87,338,395
1.798,411
$ 85,539,984
|
$ 18,949,655
9,575,963
$ 28,525,618
|
| NON-GAAP DISCLOSURE RECONCILIATION ADJUSTED EBITDA |
|
NET INCOME
Interest expense
Income tax expense
Depreciation, depletion and amortization
Accretion of discounted liabilities
Stock based compensation
ADJUSTED EBITDA
|
June 30,
2008
$ 43,112,744
855.790
25,320,183
13,714,723
142,617
3,249,717
$ 86,395,774
|
June 30,
2007
$ 13,607,268
1,080,403
7,991,570
5,317,267
88,762
1,520,751
$ 29,606,021
|
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
|
|
