RAME Ram Energy Resources, Inc. (MM)

RAM Energy Resources, Inc. (Nasdaq:RAME) today announced third quarter 2006 earnings and operating results. Third Quarter 2006 Highlights RAM reports income of $4.2 million or $0.13 a share; Cash flow from operations, a non-GAAP measure, was $5.7 million vs. $7.7 million in third quarter 2005; Third quarter production of 342,000 barrel equivalents (BOE) of oil and natural gas increased nearly four percent sequentially over the second quarter level of 329,000 BOE; Non-acquisition capital spending of $6.4 million in the quarter raises the total for the nine months to $16.3 million, on pace with full-year 2006 planned non-acquisition spending of $24.3 million; Emerging production from the Barnett Shale growing in importance, average net daily production of 205 BOE in the third quarter has grown to a current level of 240 BOE per day; Consistent with the company�s strategy of seeking acquisitions in close proximity to its existing operations, the company completed an acquisition of 447,000 BOE of reserves with current daily net production of 69 BOE for a price of $4.4 million, or $9.84 per BOE of estimated proved reserves. Integrated in the acquisition were associated gathering assets and undeveloped deep rights, including the Barnett Shale formation; RAM�s borrowing base was reaffirmed at $140 million by the company�s commercial lenders at the regularly scheduled semi-annual redetermination. Liquidity remained substantial at $44.6 million on September 30, 2006; In its Wolfcamp Shale exploration play, the company drilled two vertical wells which are currently awaiting technical analysis; The company purchased 739,175 of its common shares from Amaranth LLC at a price of $4.295 per share to mitigate the growing market uncertainty surrounding Amaranth�s holdings. �We are pleased with the operational and financial progress represented by results of the third quarter toward our goal of creating consistent profitable growth for our shareholders,� said Larry Lee, Chairman and CEO. �We continue to position the company to grow through a balanced strategy of acquisition, exploitation and exploration,� added Mr. Lee. Income and Cash Flow For the quarter ended September 30, RAM had net income of $4.2 million, or $0.13 per share, based upon 33.7 million weighted average fully diluted shares outstanding. Results of the current quarter were driven by increases in revenues derived principally from unrealized gains on derivative contracts and additionally from increases in total production, as well as a higher average price for oil and natural gas liquids. By comparison, in the third quarter 2005 RAM Energy, Inc. reported a loss of $4.9 million, or $0.63 per share, which included a pre-tax non-cash charge of $11.3 million for unrealized derivative losses. All comparative information in this release relates to the same 2005 period financial and operating results of RAM Energy, Inc., the exploration and production entity acquired by the company in May 2006. Cash flow from operations, a non-GAAP measure, was $5.7 million for the third quarter of 2006 compared to cash flow of $7.7 million in the same quarter of 2005. See the attached table for reconciliation of these non-GAAP financial measures to the corresponding GAAP amounts of cash provided by operating activities of $9.1 million for the third quarter of 2006 and $1.5 million for the same quarter in 2005. Production Total production for the third quarter 2006 rose to 342,000 BOE, an increase of 5,000 BOE compared to the year-ago quarter of 337,000 BOE. The increase is primarily attributable to rising production from the Barnett Shale and occurred despite the negative impact resulting from the vesting of an outstanding back-in interest. The vesting of the reversionary interest took effect in September 2005 and thus had the effect of limiting daily production to 3,716 BOE for the third quarter of 2006. Similarly, before giving effect to the reversionary interest, our daily average production in the third quarter of 2006 would have been 3,843 BOE versus 3,665 BOE for last year�s third quarter, an increase of five percent. The impact of the reversionary interest reduced daily production by 127 BOE, aggregating to a total of 11,684 BOE in the third quarter 2006. Indicating the trend of rising production, unmasked by the impact of reversionary interest in current year-over-year comparisons, production in the third quarter is up nearly four percent sequentially over that of the second quarter of 2006. Commodity Prices and Revenues The company�s realized price for oil increased four percent to an average of $62.79 per barrel in the third quarter of 2006, compared with last year�s third quarter average realized price of $60.36 per barrel. The company�s realized price for natural gas decreased 18 percent to average $6.13 per thousand cubic feet (Mcf) compared to an average of $7.48 per Mcf in the third quarter of 2005. The increase in oil and gas production combined with the increase in the average realized price of oil and natural gas liquids more than offset the effect of the decrease in production resulting from the back-in interest and the decline in the average price of gas, allowing oil and gas sales to increase nearly two percent to $18.3 million for the third quarter of 2006 compared to $18.0 million in the same quarter of 2005. The company does not formally designate its derivative contracts as hedges, nor are its derivative contracts associated with its production; therefore realized prices are not associated with derivative gains or losses. With the addition to oil and gas sales of $3.9 million attributable to the net of derivative contract settlements, premiums and unrealized mark-to-market gains on derivatives, total revenues for the third quarter of 2006 were increased to $22.2 million, compared to $6.0 million of total revenues, principally a result of unrealized mark-to-market losses, in the same period of 2005. Costs and Expenses Production costs totaled $4.3 million, or $12.60 per BOE, in the third quarter of 2006, eight percent higher than the $11.62 per BOE in the previous year�s quarter. The increase was primarily due to increased utility costs, higher maintenance costs due to additional producing wells and increased costs associated with non-operated wells. Production taxes were $843,000, or $2.47 per BOE, in this year�s third quarter, 10 percent below the $2.73 per BOE in the third quarter of 2005, principally as a result of the lower average price of natural gas. General and administrative expenses of $2.3 million, or $6.74 per BOE, fell four percent on a BOE basis. Interest expense for the third quarter rose by $761,000 to $3.9 million compared to the prior year�s quarter due to higher interest rates and higher outstanding indebtedness. Nine Months Results For the nine months ended September 30, 2006 RAM reported net income of $4.0 million, or $0.18 a share, on 22.1 million weighted average fully diluted shares outstanding. Included in the nine month 2006 period is a derivative mark-to-market gain of $5.9 million. For the nine months ended September 30, 2005, RAM recorded a net loss of $3.6 million, or $0.47 per share, which included a pre-tax derivative mark-to-market unrealized loss of $14.5 million. Cash flow from operations, a non-GAAP measure, was $15.0 million for the first nine months of 2006 compared to $17.6 million for the same period in 2005. See the attached table for reconciliation of these non-GAAP financial measures to the corresponding GAAP amounts of cash provided by operating activities of $25.3 million for the nine months ended September 30, 2006 and $10.6 million for the nine months ended September 30, 2005. Nine Months Operations Update Oil and gas related capital expenditures totaled $11.0 million in the third quarter: $6.1 million was allocated to lower risk development activities; $278,000 for exploratory activities; and $4.6 million for the acquisition of proved and unproved properties, bringing total capital spending for the nine months to $21.5 million. Total non-acquisition capital expenditures of $16.3 million for the first nine months of 2006 are on pace with RAM�s targeted non-acquisition capital budget of $24.3 million for the 2006 year. RAM participated in the drilling of 66 gross (63.2 net) development wells and five gross (2.2 net) exploratory wells in the first nine months of the year in contrast to a total of 44 gross (42.9 net) wells drilled in the same period of 2005, the higher number of wells in 2006 reflecting an increase in capital expenditures during the current year. In the Electra/Burkburnett area of North Texas, the company�s largest producing area, RAM drilled 60 net wells of which 56 were completed as producing wells during the first nine months of the year, and four were in various stages of completion at the end of the third quarter. By contrast, 42 wells were drilled and completed in the first nine months of 2005. The company owns a 100 percent working interest in and operates Electra/Burkburnett. Activity is also continuing in the company�s Boonsville area. Following the drilling of the Sealy #B-6 well in the Boonsville area late in the second quarter, RAM drilled the Tarrant D-10 well which was completed subsequent to the third quarter and is currently producing at the net daily rate of 12 BOE. In the company�s Barnett Shale acreage in Jack and Wise Counties, Texas, RAM participated in the drilling of two wells in the first nine months of 2006 compared to one in the same period of the prior year. Currently the company owns an interest in nine gross (3.9 net) Barnett Shale producing wells. Average daily production attributable to the company�s interest in Barnett Shale wells in the third quarter 2006 was 205 BOE. Currently Barnett Shale wells are producing at a daily rate of 240 BOE. A seismic acquisition program is also underway to help identify potential future drilling locations and to provide the company with a higher degree of autonomy in the timing and selection of future well sites. In the company�s non-operated Vinegarone Field in South Texas, two wells were drilled earlier this year and are awaiting stimulation treatment. RAM has a 25 percent working interest in these two wells. The company also has a 12 percent working interest in the Weyerhauser No. 5-22 well in the Arkoma Basin which was, subsequent to the third quarter, completed successfully as a gas well and is currently producing at a daily rate of 2.2 MMcf. Also, subsequent to the third quarter, RAM drilled two vertical wells in its exploration play located in Southwest Texas targeting the Wolfcamp Shale. Currently the company is awaiting analysis of core samples, logs and other technical data. The two wells were drilled on the company�s recently acquired 15,000 acres in which it currently holds a 100 percent working interest. RAM to Webcast Third Quarter 2006 Conference Call The company�s teleconference call to review third quarter results will be broadcast live on a listen-only basis over the internet on Tuesday, November 14, at 3:00 p.m. Central Standard Time. Interested parties may access the webcast by visiting the RAM Energy Resources, Inc. website at www.ramenergy.com. From the home page, select the Investor Relations tab and then click on the microphone icon. The teleconference may be accessed by dialing 866.356.4123 (domestic) or 617.597.5393 (international) and providing the call identifier �88038011� to the operator. The webcast and the accompanying slide presentation will be available for replay on the company�s website. An audio replay will be available until November 22, 2006 by dialing 888.286.8010 (domestic) or 617.801.6888 (international) and using passcode 60511624. Forward-Looking Statements This release includes certain statements that may be deemed to be �forward-looking statements� within the meaning of the Private Securities Litigation Reform Act of 1995. All statements in this release, other than statements of historical facts, that address estimates of capital spending, NYMEX prices of oil and gas and company realizations, the impact of oil and gas derivatives, drilling activities, borrowing availability, and events or developments that the company expects or believes are forward-looking statements. Although the company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include oil and gas prices, exploitation and exploration successes, actions taken and to be taken by the government as a result of political and economic conditions, continued availability of capital and financing, and general economic, market or business conditions as well as other risk factors described from time to time in the company�s filings with the SEC. The company assumes no obligation to update publicly such forward-looking statements, whether as a result of new information, future events or otherwise. RAM Energy Resources, Inc. is an independent energy company engaged in the acquisition, exploitation, exploration, and development of oil and gas properties and the marketing of crude oil and natural gas. Company headquarters are in Tulsa, Oklahoma, and its common shares are traded on the Nasdaq under the symbol RAME. For additional information, visit the company website at www.ramenergy.com. RAM Energy Resources, Inc. Condensed consolidated balance sheets (in thousands, except share and per share amounts) � September 30, 2006 December 31, 2005 ASSETS (unaudited) CURRENT ASSETS: Cash and cash equivalents $ 7,592� $ 70� Accounts receivable: Oil and natural gas sales 6,501� 7,422� Joint interest operations, net of allowance of $185 ($31 at December 31, 2005) 234� 566� Related party -� 142� Other, net of allowance of $39 ($13 at December 31, 2005) 296� 175� Derivative assets 308� -� Prepaid expenses 391� 756� Other current assets � 36� � 484� Total current assets 15,358� 9,615� � PROPERTIES AND EQUIPMENT, AT COST: Oil and natural gas properties and equipment, using full cost accounting 178,668� 160,704� Other property and equipment � 6,110� � 7,276� 184,778� 167,980� Less accumulated amortization and depreciation � (45,351) � (36,848) Total properties and equipment 139,427� 131,132� OTHER ASSETS: Deferred loan costs, net of accumulated amortization of $4,639 ($4,905 at December 31, 2005) 2,791� 1,613� Other � 581� � 916� Total assets $ 158,157� $ 143,276� � LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES: Accounts payable: Trade $ 5,386� 4,343� Oil and natural gas proceeds due others 4,703� 3,201� Related party 18� 41� Other 32� -� Accrued liabilities: Compensation 830� 749� Interest 3,064� 1,745� Income taxes 461� 146� Derivative liabilities -� 3,510� Long-term debt due within one year � 194� � 560� Total current liabilities 14,688� 14,295� � OIL & NATURAL GAS PROCEEDS DUE OTHERS 2,465� 1,972� LONG-TERM DEBT 131,502� 112,286� DEFERRED AND OTHER NON-CURRENT INCOME TAXES 27,834� 25,300� ASSET RETIREMENT OBLIGATION 10,711� 10,192� COMMITMENTS AND CONTINGENCIES -� -� � STOCKHOLDERS' DEFICIT: Common stock, $0.0001 par value, 100,000,000 and 30,000,000 shares authorized, 33,630,000 and 7,700,000 shares issued at September 30, 2006 and December 31, 2005, respectively 3� 1� Additional paid-in capital 2,218� 95� Treasury stock - 837,275 shares at cost (3,768) -� Accumulated deficit � (27,496) � (20,865) Stockholders' deficit � (29,043) � (20,769) Total liabilities and stockholders' deficit $ 158,157� $ 143,276� RAM Energy Resources, Inc. Condensed consolidated statements of operations (in thousands, except share and per share amounts) (unaudited) � Three Months Ended September 30, Nine Months Ended September 30, � 2006� � 2005� � 2006� � 2005� OPERATING REVENUES: Oil and natural gas sales $ 18,267� $ 17,974� $ 53,050� $ 48,140� Realized and unrealized gains (losses) on derivatives 3,878� (12,397) 1,108� (16,613) Other � 42� � 398� � 466� � 983� Total operating revenues � 22,187� � 5,975� � 54,624� � 32,510� � OPERATING EXPENSES: Oil and natural gas production taxes 843� 919� 2,527� 2,460� Oil and natural gas production expenses 4,309� 3,917� 13,222� 11,453� Amortization and depreciation 3,495� 3,397� 10,019� 9,213� Accretion expense 133� 71� 398� 217� Share-based compensation -� -� 2,218� -� General and administrative, overhead and other expenses � 2,304� � 2,367� � 6,351� � 6,285� Total operating expenses � 11,084� � 10,671� � 34,735� � 29,628� Operating income (loss) � 11,103� � (4,696) � 19,889� � 2,882� � OTHER INCOME (EXPENSE): Interest expense (3,906) (3,145) (13,213) (8,769) Interest income � 129� � 19� � 238� � 41� INCOME (LOSS) BEFORE INCOME TAXES � 7,326� � (7,822) � 6,914� � (5,846) � INCOME TAX PROVISION (BENEFIT) � 3,081� � (2,972) � 2,924� � (2,222) � NET INCOME (LOSS) $ 4,245� $ (4,850) $ 3,990� $ (3,624) � EARNINGS (LOSS) PER SHARE: Basic $ 0.13� $ (0.63) $ 0.19� $ (0.47) Diluted $ 0.13� $ (0.63) $ 0.18� $ (0.47) � WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 33,459,589� 7,700,000� 21,501,633� 7,700,000� Diluted 33,692,544� 7,700,000� 22,105,987� 7,700,000� RAM Energy Resources, Inc. Condensed consolidated statements of cash flows (in thousands) (unaudited) � Nine Months Ended September 30, � 2006� � 2005� OPERATING ACTIVITIES: Net income (loss) $ 3,990� $ (3,624) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Amortization and depreciation: Oil and natural gas properties and equipment 9,524� 8,894� Amortization of deferred loan costs and senior notes discount 776� 629� Charge off of unamortized deferred loan costs 1,055� -� Other property and equipment 495� 321� Accretion expense 398� 217� Unrealized gain (loss) on derivatives (5,874) 14,855� Deferred income taxes 3,337� (3,648) Share-based compensation 2,218� -� Gain on disposal of other property and equipment (99) -� Changes in operating assets and liabilities: Accounts receivable 1,303� (1,346) Prepaid expenses, deposits, and other assets 816� 120� Accounts payable 2,550� 103� Accrued liabilities and other � 4,805� � (5,905) Total adjustments � 21,304� � 14,240� Net cash provided by operating activities � 25,294� � 10,616� � INVESTING ACTIVITIES: Payments for oil and natural gas properties and equipment (21,529) (11,078) Proceeds from sales of oil and natural gas properties and equipment 3,565� 2,346� Payments for other property and equipment (726) (1,145) Proceeds from sales of other property and equipment 366� -� Payments of merger costs (4,187) -� Cash acquired in merger � 3,801� � -� Net cash used in investing activities (18,710) (9,877) � FINANCING ACTIVITIES: Payments on long-term debt (87,738) (6,840) Payments of loan fees (2,978) (424) Proceeds from borrowings on long-term debt 106,557� 8,003� Stock redemption (9,792) -� Repurchase of stock (3,768) -� Deferred income taxes on share-based compensation (843) -� Dividends paid � (500) � (900) Net cash provided by (used in) financing activities � 938� � (161) Net increase in cash and cash equivalents 7,522� 578� � Cash and cash equivalents at beginning of period � 70� � 1,175� Cash and cash equivalents at end of period $ 7,592� $ 1,753� RAM Energy Resources, Inc. Reconciliation of cash flow from operations (a non-GAAP measure) to GAAP net cash provided by operating activities � Non-GAAP Financial Measure Cash flow, a non-GAAP measure, represents cash provided by operating activities before the impact of discontinued operations, changes in working capital items related to operating activities, and further adjusted for unrealized gains or losses on derivative transactions. This non-GAAP measure is presented because management believes it is a useful adjunct to cash provided by operating activities under accounting principles generally accepted in the United States (GAAP). This non-GAAP cash flow measure is widely accepted as a financial indicator of an oil and gas company�s ability to generate cash which is used to internally fund exploration and development activities and to service debt. This non-GAAP measure is not a measure of financial performance under GAAP and should not be considered as an alternative to cash provided (used) by operating, investing, or financing activities as an indicator of cash flows, or as a measure of liquidity. � 2006� Three months ended Nine Months Ended September 30 September 30 � Cash flow from operations (a non-GAAP measure) $5,708� $14,977� Plus: working capital changes 3,377� 9,474� Less: deferred income taxes on share-based compensation classified as financing activities -� (843) Net cash provided by operating activities per condensed consolidated statements of cash flow $9,085� $25,294� � Cash flow from operations (a non-GAAP measure) $5,708� $14,977� Less: realized (losses) on derivatives (1,152) (4,766) Less: unrealized gains (losses) on derivatives per condensed consolidated statements of cash flow 5,030� 5,874� Cash flow from operations (a non-GAAP measure) excluding realized and unrealized gains (losses) on derivatives $1,830� $13,869� � 2005� Three months ended Nine Months Ended September 30 September 30 � Cash flow from operations (a non-GAAP measure) $7,679� $17,644� Plus: working capital changes (6,139) (7,028) Less: deferred income taxes on share-based compensation classified as financing activities -� -� Net cash provided by operating activities per condensed consolidated statements of cash flow $1,540� $10,616� � Cash flow from operations (a non-GAAP measure) $7,679� $17,644� Less: realized (losses) on derivatives (1,133) (2,100) Less: unrealized gains (losses) on derivatives per condensed consolidated statements of cash flow (11,264) (14,513) Cash flow from operations (a non-GAAP measure) excluding realized and unrealized gains (losses) on derivatives $20,076� $34,257� RAM Energy Resources, Inc. (Nasdaq:RAME) today announced third quarter 2006 earnings and operating results. Third Quarter 2006 Highlights -- RAM reports income of $4.2 million or $0.13 a share; -- Cash flow from operations, a non-GAAP measure, was $5.7 million vs. $7.7 million in third quarter 2005; -- Third quarter production of 342,000 barrel equivalents (BOE) of oil and natural gas increased nearly four percent sequentially over the second quarter level of 329,000 BOE; -- Non-acquisition capital spending of $6.4 million in the quarter raises the total for the nine months to $16.3 million, on pace with full-year 2006 planned non-acquisition spending of $24.3 million; -- Emerging production from the Barnett Shale growing in importance, average net daily production of 205 BOE in the third quarter has grown to a current level of 240 BOE per day; -- Consistent with the company's strategy of seeking acquisitions in close proximity to its existing operations, the company completed an acquisition of 447,000 BOE of reserves with current daily net production of 69 BOE for a price of $4.4 million, or $9.84 per BOE of estimated proved reserves. Integrated in the acquisition were associated gathering assets and undeveloped deep rights, including the Barnett Shale formation; -- RAM's borrowing base was reaffirmed at $140 million by the company's commercial lenders at the regularly scheduled semi-annual redetermination. Liquidity remained substantial at $44.6 million on September 30, 2006; -- In its Wolfcamp Shale exploration play, the company drilled two vertical wells which are currently awaiting technical analysis; -- The company purchased 739,175 of its common shares from Amaranth LLC at a price of $4.295 per share to mitigate the growing market uncertainty surrounding Amaranth's holdings. "We are pleased with the operational and financial progress represented by results of the third quarter toward our goal of creating consistent profitable growth for our shareholders," said Larry Lee, Chairman and CEO. "We continue to position the company to grow through a balanced strategy of acquisition, exploitation and exploration," added Mr. Lee. Income and Cash Flow For the quarter ended September 30, RAM had net income of $4.2 million, or $0.13 per share, based upon 33.7 million weighted average fully diluted shares outstanding. Results of the current quarter were driven by increases in revenues derived principally from unrealized gains on derivative contracts and additionally from increases in total production, as well as a higher average price for oil and natural gas liquids. By comparison, in the third quarter 2005 RAM Energy, Inc. reported a loss of $4.9 million, or $0.63 per share, which included a pre-tax non-cash charge of $11.3 million for unrealized derivative losses. All comparative information in this release relates to the same 2005 period financial and operating results of RAM Energy, Inc., the exploration and production entity acquired by the company in May 2006. Cash flow from operations, a non-GAAP measure, was $5.7 million for the third quarter of 2006 compared to cash flow of $7.7 million in the same quarter of 2005. See the attached table for reconciliation of these non-GAAP financial measures to the corresponding GAAP amounts of cash provided by operating activities of $9.1 million for the third quarter of 2006 and $1.5 million for the same quarter in 2005. Production Total production for the third quarter 2006 rose to 342,000 BOE, an increase of 5,000 BOE compared to the year-ago quarter of 337,000 BOE. The increase is primarily attributable to rising production from the Barnett Shale and occurred despite the negative impact resulting from the vesting of an outstanding back-in interest. The vesting of the reversionary interest took effect in September 2005 and thus had the effect of limiting daily production to 3,716 BOE for the third quarter of 2006. Similarly, before giving effect to the reversionary interest, our daily average production in the third quarter of 2006 would have been 3,843 BOE versus 3,665 BOE for last year's third quarter, an increase of five percent. The impact of the reversionary interest reduced daily production by 127 BOE, aggregating to a total of 11,684 BOE in the third quarter 2006. Indicating the trend of rising production, unmasked by the impact of reversionary interest in current year-over-year comparisons, production in the third quarter is up nearly four percent sequentially over that of the second quarter of 2006. Commodity Prices and Revenues The company's realized price for oil increased four percent to an average of $62.79 per barrel in the third quarter of 2006, compared with last year\'s third quarter average realized price of $60.36 per barrel. The company's realized price for natural gas decreased 18 percent to average $6.13 per thousand cubic feet (Mcf) compared to an average of $7.48 per Mcf in the third quarter of 2005. The increase in oil and gas production combined with the increase in the average realized price of oil and natural gas liquids more than offset the effect of the decrease in production resulting from the back-in interest and the decline in the average price of gas, allowing oil and gas sales to increase nearly two percent to $18.3 million for the third quarter of 2006 compared to $18.0 million in the same quarter of 2005. The company does not formally designate its derivative contracts as hedges, nor are its derivative contracts associated with its production; therefore realized prices are not associated with derivative gains or losses. With the addition to oil and gas sales of $3.9 million attributable to the net of derivative contract settlements, premiums and unrealized mark-to-market gains on derivatives, total revenues for the third quarter of 2006 were increased to $22.2 million, compared to $6.0 million of total revenues, principally a result of unrealized mark-to-market losses, in the same period of 2005. Costs and Expenses Production costs totaled $4.3 million, or $12.60 per BOE, in the third quarter of 2006, eight percent higher than the $11.62 per BOE in the previous year's quarter. The increase was primarily due to increased utility costs, higher maintenance costs due to additional producing wells and increased costs associated with non-operated wells. Production taxes were $843,000, or $2.47 per BOE, in this year's third quarter, 10 percent below the $2.73 per BOE in the third quarter of 2005, principally as a result of the lower average price of natural gas. General and administrative expenses of $2.3 million, or $6.74 per BOE, fell four percent on a BOE basis. Interest expense for the third quarter rose by $761,000 to $3.9 million compared to the prior year's quarter due to higher interest rates and higher outstanding indebtedness. Nine Months Results For the nine months ended September 30, 2006 RAM reported net income of $4.0 million, or $0.18 a share, on 22.1 million weighted average fully diluted shares outstanding. Included in the nine month 2006 period is a derivative mark-to-market gain of $5.9 million. For the nine months ended September 30, 2005, RAM recorded a net loss of $3.6 million, or $0.47 per share, which included a pre-tax derivative mark-to-market unrealized loss of $14.5 million. Cash flow from operations, a non-GAAP measure, was $15.0 million for the first nine months of 2006 compared to $17.6 million for the same period in 2005. See the attached table for reconciliation of these non-GAAP financial measures to the corresponding GAAP amounts of cash provided by operating activities of $25.3 million for the nine months ended September 30, 2006 and $10.6 million for the nine months ended September 30, 2005. Nine Months Operations Update Oil and gas related capital expenditures totaled $11.0 million in the third quarter: $6.1 million was allocated to lower risk development activities; $278,000 for exploratory activities; and $4.6 million for the acquisition of proved and unproved properties, bringing total capital spending for the nine months to $21.5 million. Total non-acquisition capital expenditures of $16.3 million for the first nine months of 2006 are on pace with RAM's targeted non-acquisition capital budget of $24.3 million for the 2006 year. RAM participated in the drilling of 66 gross (63.2 net) development wells and five gross (2.2 net) exploratory wells in the first nine months of the year in contrast to a total of 44 gross (42.9 net) wells drilled in the same period of 2005, the higher number of wells in 2006 reflecting an increase in capital expenditures during the current year. In the Electra/Burkburnett area of North Texas, the company's largest producing area, RAM drilled 60 net wells of which 56 were completed as producing wells during the first nine months of the year, and four were in various stages of completion at the end of the third quarter. By contrast, 42 wells were drilled and completed in the first nine months of 2005. The company owns a 100 percent working interest in and operates Electra/Burkburnett. Activity is also continuing in the company's Boonsville area. Following the drilling of the Sealy #B-6 well in the Boonsville area late in the second quarter, RAM drilled the Tarrant D-10 well which was completed subsequent to the third quarter and is currently producing at the net daily rate of 12 BOE. In the company's Barnett Shale acreage in Jack and Wise Counties, Texas, RAM participated in the drilling of two wells in the first nine months of 2006 compared to one in the same period of the prior year. Currently the company owns an interest in nine gross (3.9 net) Barnett Shale producing wells. Average daily production attributable to the company's interest in Barnett Shale wells in the third quarter 2006 was 205 BOE. Currently Barnett Shale wells are producing at a daily rate of 240 BOE. A seismic acquisition program is also underway to help identify potential future drilling locations and to provide the company with a higher degree of autonomy in the timing and selection of future well sites. In the company's non-operated Vinegarone Field in South Texas, two wells were drilled earlier this year and are awaiting stimulation treatment. RAM has a 25 percent working interest in these two wells. The company also has a 12 percent working interest in the Weyerhauser No. 5-22 well in the Arkoma Basin which was, subsequent to the third quarter, completed successfully as a gas well and is currently producing at a daily rate of 2.2 MMcf. Also, subsequent to the third quarter, RAM drilled two vertical wells in its exploration play located in Southwest Texas targeting the Wolfcamp Shale. Currently the company is awaiting analysis of core samples, logs and other technical data. The two wells were drilled on the company's recently acquired 15,000 acres in which it currently holds a 100 percent working interest. RAM to Webcast Third Quarter 2006 Conference Call The company's teleconference call to review third quarter results will be broadcast live on a listen-only basis over the internet on Tuesday, November 14, at 3:00 p.m. Central Standard Time. Interested parties may access the webcast by visiting the RAM Energy Resources, Inc. website at www.ramenergy.com. From the home page, select the Investor Relations tab and then click on the microphone icon. The teleconference may be accessed by dialing 866.356.4123 (domestic) or 617.597.5393 (international) and providing the call identifier "88038011" to the operator. The webcast and the accompanying slide presentation will be available for replay on the company's website. An audio replay will be available until November 22, 2006 by dialing 888.286.8010 (domestic) or 617.801.6888 (international) and using passcode 60511624. Forward-Looking Statements This release includes certain statements that may be deemed to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements in this release, other than statements of historical facts, that address estimates of capital spending, NYMEX prices of oil and gas and company realizations, the impact of oil and gas derivatives, drilling activities, borrowing availability, and events or developments that the company expects or believes are forward-looking statements. Although the company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include oil and gas prices, exploitation and exploration successes, actions taken and to be taken by the government as a result of political and economic conditions, continued availability of capital and financing, and general economic, market or business conditions as well as other risk factors described from time to time in the company's filings with the SEC. The company assumes no obligation to update publicly such forward-looking statements, whether as a result of new information, future events or otherwise. RAM Energy Resources, Inc. is an independent energy company engaged in the acquisition, exploitation, exploration, and development of oil and gas properties and the marketing of crude oil and natural gas. Company headquarters are in Tulsa, Oklahoma, and its common shares are traded on the Nasdaq under the symbol RAME. For additional information, visit the company website at www.ramenergy.com. -0- *T RAM Energy Resources, Inc. Condensed consolidated balance sheets (in thousands, except share and per share amounts) September 30, December 31, 2006 2005 -------------- --------------- ASSETS (unaudited) CURRENT ASSETS: Cash and cash equivalents $ 7,592 $ 70 Accounts receivable: Oil and natural gas sales 6,501 7,422 Joint interest operations, net of allowance of $185 ($31 at December 31, 2005) 234 566 Related party - 142 Other, net of allowance of $39 ($13 at December 31, 2005) 296 175 Derivative assets 308 - Prepaid expenses 391 756 Other current assets 36 484 -------------- --------------- Total current assets 15,358 9,615 PROPERTIES AND EQUIPMENT, AT COST: Oil and natural gas properties and equipment, using full cost accounting 178,668 160,704 Other property and equipment 6,110 7,276 -------------- --------------- 184,778 167,980 Less accumulated amortization and depreciation (45,351) (36,848) -------------- --------------- Total properties and equipment 139,427 131,132 OTHER ASSETS: Deferred loan costs, net of accumulated amortization of $4,639 ($4,905 at December 31, 2005) 2,791 1,613 Other 581 916 -------------- --------------- Total assets $ 158,157 $ 143,276 ============== =============== LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES: Accounts payable: Trade $ 5,386 4,343 Oil and natural gas proceeds due others 4,703 3,201 Related party 18 41 Other 32 - Accrued liabilities: Compensation 830 749 Interest 3,064 1,745 Income taxes 461 146 Derivative liabilities - 3,510 Long-term debt due within one year 194 560 -------------- --------------- Total current liabilities 14,688 14,295 OIL & NATURAL GAS PROCEEDS DUE OTHERS 2,465 1,972 LONG-TERM DEBT 131,502 112,286 DEFERRED AND OTHER NON-CURRENT INCOME TAXES 27,834 25,300 ASSET RETIREMENT OBLIGATION 10,711 10,192 COMMITMENTS AND CONTINGENCIES - - STOCKHOLDERS' DEFICIT: Common stock, $0.0001 par value, 100,000,000 and 30,000,000 shares authorized, 33,630,000 and 7,700,000 shares issued at September 30, 2006 and December 31, 2005, respectively 3 1 Additional paid-in capital 2,218 95 Treasury stock - 837,275 shares at cost (3,768) - Accumulated deficit (27,496) (20,865) -------------- --------------- Stockholders' deficit (29,043) (20,769) -------------- --------------- Total liabilities and stockholders' deficit $ 158,157 $ 143,276 ============== =============== *T -0- *T RAM Energy Resources, Inc. Condensed consolidated statements of operations (in thousands, except share and per share amounts) (unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 2006 2005 ------------ ----------- ------------ ----------- OPERATING REVENUES: Oil and natural gas sales $ 18,267 $ 17,974 $ 53,050 $ 48,140 Realized and unrealized gains (losses) on derivatives 3,878 (12,397) 1,108 (16,613) Other 42 398 466 983 ------------ ----------- ------------ ----------- Total operating revenues 22,187 5,975 54,624 32,510 ------------ ----------- ------------ ----------- OPERATING EXPENSES: Oil and natural gas production taxes 843 919 2,527 2,460 Oil and natural gas production expenses 4,309 3,917 13,222 11,453 Amortization and depreciation 3,495 3,397 10,019 9,213 Accretion expense 133 71 398 217 Share-based compensation - - 2,218 - General and administrative, overhead and other expenses 2,304 2,367 6,351 6,285 ------------ ----------- ------------ ----------- Total operating expenses 11,084 10,671 34,735 29,628 ------------ ----------- ------------ ----------- Operating income (loss) 11,103 (4,696) 19,889 2,882 ------------ ----------- ------------ ----------- OTHER INCOME (EXPENSE): Interest expense (3,906) (3,145) (13,213) (8,769) Interest income 129 19 238 41 ------------ ----------- ------------ ----------- INCOME (LOSS) BEFORE INCOME TAXES 7,326 (7,822) 6,914 (5,846) ------------ ----------- ------------ ----------- INCOME TAX PROVISION (BENEFIT) 3,081 (2,972) 2,924 (2,222) ------------ ----------- ------------ ----------- NET INCOME (LOSS) $ 4,245 $ (4,850) $ 3,990 $ (3,624) ============ =========== ============ =========== EARNINGS (LOSS) PER SHARE: Basic $ 0.13 $ (0.63) $ 0.19 $ (0.47) Diluted $ 0.13 $ (0.63) $ 0.18 $ (0.47) WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 33,459,589 7,700,000 21,501,633 7,700,000 Diluted 33,692,544 7,700,000 22,105,987 7,700,000 *T -0- *T RAM Energy Resources, Inc. Condensed consolidated statements of cash flows (in thousands) (unaudited) Nine Months Ended September 30, ------------------- 2006 2005 --------- --------- OPERATING ACTIVITIES: Net income (loss) $ 3,990 $ (3,624) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Amortization and depreciation: Oil and natural gas properties and equipment 9,524 8,894 Amortization of deferred loan costs and senior notes discount 776 629 Charge off of unamortized deferred loan costs 1,055 - Other property and equipment 495 321 Accretion expense 398 217 Unrealized gain (loss) on derivatives (5,874) 14,855 Deferred income taxes 3,337 (3,648) Share-based compensation 2,218 - Gain on disposal of other property and equipment (99) - Changes in operating assets and liabilities: Accounts receivable 1,303 (1,346) Prepaid expenses, deposits, and other assets 816 120 Accounts payable 2,550 103 Accrued liabilities and other 4,805 (5,905) --------- --------- Total adjustments 21,304 14,240 --------- --------- Net cash provided by operating activities 25,294 10,616 --------- --------- INVESTING ACTIVITIES: Payments for oil and natural gas properties and equipment (21,529) (11,078) Proceeds from sales of oil and natural gas properties and equipment 3,565 2,346 Payments for other property and equipment (726) (1,145) Proceeds from sales of other property and equipment 366 - Payments of merger costs (4,187) - Cash acquired in merger 3,801 - --------- --------- Net cash used in investing activities (18,710) (9,877) FINANCING ACTIVITIES: Payments on long-term debt (87,738) (6,840) Payments of loan fees (2,978) (424) Proceeds from borrowings on long-term debt 106,557 8,003 Stock redemption (9,792) - Repurchase of stock (3,768) - Deferred income taxes on share-based compensation (843) - Dividends paid (500) (900) --------- --------- Net cash provided by (used in) financing activities 938 (161) --------- --------- Net increase in cash and cash equivalents 7,522 578 Cash and cash equivalents at beginning of period 70 1,175 --------- --------- Cash and cash equivalents at end of period $ 7,592 $ 1,753 ========= ========= *T -0- *T RAM Energy Resources, Inc. Reconciliation of cash flow from operations (a non-GAAP measure) to GAAP net cash provided by operating activities Non-GAAP Financial Measure Cash flow, a non-GAAP measure, represents cash provided by operating activities before the impact of discontinued operations, changes in working capital items related to operating activities, and further adjusted for unrealized gains or losses on derivative transactions. This non-GAAP measure is presented because management believes it is a useful adjunct to cash provided by operating activities under accounting principles generally accepted in the United States (GAAP). This non-GAAP cash flow measure is widely accepted as a financial indicator of an oil and gas company's ability to generate cash which is used to internally fund exploration and development activities and to service debt. This non-GAAP measure is not a measure of financial performance under GAAP and should not be considered as an alternative to cash provided (used) by operating, investing, or financing activities as an indicator of cash flows, or as a measure of liquidity. 2006 ------------------------------------ Three months ended Nine Months Ended September 30 September 30 ------------------ ----------------- Cash flow from operations (a non- GAAP measure) $5,708 $14,977 Plus: working capital changes 3,377 9,474 Less: deferred income taxes on share-based compensation classified as financing activities - (843) ------------------ ----------------- Net cash provided by operating activities per condensed consolidated statements of cash flow $9,085 $25,294 ================== ================= Cash flow from operations (a non- GAAP measure) $5,708 $14,977 Less: realized (losses) on derivatives (1,152) (4,766) Less: unrealized gains (losses) on derivatives per condensed consolidated statements of cash flow 5,030 5,874 ------------------ ----------------- Cash flow from operations (a non- GAAP measure) excluding realized and unrealized gains (losses) on derivatives $1,830 $13,869 ================== ================= 2005 ------------------------------------ Three months ended Nine Months Ended September 30 September 30 ------------------ ----------------- Cash flow from operations (a non- GAAP measure) $7,679 $17,644 Plus: working capital changes (6,139) (7,028) Less: deferred income taxes on share-based compensation classified as financing activities - - ------------------ ----------------- Net cash provided by operating activities per condensed consolidated statements of cash flow $1,540 $10,616 ================== ================= Cash flow from operations (a non- GAAP measure) $7,679 $17,644 Less: realized (losses) on derivatives (1,133) (2,100) Less: unrealized gains (losses) on derivatives per condensed consolidated statements of cash flow (11,264) (14,513) ------------------ ----------------- Cash flow from operations (a non- GAAP measure) excluding realized and unrealized gains (losses) on derivatives $20,076 $34,257 ================== ================= *T