RAM Energy Resources, Inc. (Nasdaq: RAME) announced today that
estimates of the company’s proved oil and natural gas reserves at
December 31, 2009 calculated using new SEC rules (SEC Case) totaled
33.9 million barrels of oil equivalent (BOE) with a PV-10 value of
$336.1 million. The company added 4.0 million BOE of reserves
during the year, replacing 156% of 2009 production of 2.5 million
BOE despite limited capital spending and sales of certain
non-strategic reserves during the third quarter. RAM continues to
employ, as it has in the past, an independent petroleum engineering
firm to prepare estimates of its proved reserves in all of its
operating areas.
In addition to the SEC Case, RAM also computed an estimate of
proved reserves at December 31, 2009 using NYMEX futures strip
pricing for the ensuing 36 months, the same pricing used by the
company’s lenders to support the company’s borrowing base. RAM’s
existing borrowing base is $286 million under the current facility
and has not changed appreciably in the last year. Proved reserve
volumes using strip pricing at December 31, 2009 were 38.9 million
BOE with a PV-10 value of $682.0 million, a substantial increase of
17% compared to $582.1 million of PV-10 value based on strip
pricing at year-end 2008.
“Given the deteriorating economic environment which prevailed in
early 2009, we set a goal of maintaining our production at 2008’s
record level, reducing costs and maintaining our financial
flexibility. I am pleased that our production goal was met and that
we preserved the value of our assets principally through drilling
low-risk PUD prospects with total capital spending of less than $30
million. As economic improvement became more visible during the
second half of the year we decided to step up our drilling activity
in South Texas, an area of previous successes and plentiful
projects in an effort to return to solid production growth in
2010,” said Larry Lee, President and CEO.
Reserve Composition
Year-end 2009 estimated proved reserves of 33.9 million BOE are
composed of 14.1 million barrels of oil, 5.0 million barrels of
natural gas liquids and 89.2 Bcf of natural gas. Crude oil and
natural gas liquids represent 56% of total proved reserves, and
natural gas reserves represent the remaining 44% of reserves.
Proved developed reserves accounted for nearly 57% of total proved
reserves and accounted for 66% of the total PV-10 value of $336.1
million, providing an underpinning to the confidence in the cash
flow stream in 2010 and beyond.
Fourth Quarter 2009 Operations Update
Production
Total production for the fourth quarter 2009 was 604,000 BOE, or
6,565 BOE per day compared to the year-ago quarter of 653,000 BOE,
or 7,097 BOE per day. RAM’s production for the fourth quarter of
2009 fell 7% over that of the year-ago quarter, principally as a
result of the sale of production in the third quarter 2009 which
removed daily production of approximately 140 BOE from total fourth
quarter 2009 production compared to the year-ago level, the low
level of capital spending in the second and third quarters and the
negative impact from unusually severe winter weather late in the
year which constrained the movement of drilling and workover
equipment and interrupted the electrical power supply. The
properties sold accounted for approximately 26% of the fourth
quarter 2009 production decline versus the same quarter in
2008.
Commodity Prices
The company’s realized price for oil increased 28% to an average
of $73.36 per barrel in the fourth quarter of 2009, compared with
last year’s fourth quarter average realized price of $57.56 per
barrel. RAM’s realized price for natural gas liquids also increased
45% to $38.19, compared to $26.32 per barrel in the last quarter of
2008. In contrast, the price of natural gas dropped 22% to $3.93
per Mcf compared to $5.05 per Mcf in the fourth quarter of
2008.
Capital Expenditures
Capital expenditures for the fourth quarter of 2009 totaled $8.1
million; composed of $7.7 million of development costs, $260,000 of
acquisition costs and $90,000 attributable to exploration. Most of
the capital spending in the quarter was allocated to re-kindling
production growth from developing fields in the company’s La Copita
area of South Texas. The Garza-Hitchcock #19 well spud late in the
third quarter was drilled to a total depth of 9,780 feet into the
Vicksburg formation and began flowing to sales in mid-November with
a daily IP rate of 2,187Mcf and 368 barrels of condensate. The
Brannan #7 well, spud in late October, was drilled to a total depth
of 9,200 feet, also into the Vicksburg formation and began flowing
to sales December 19 with a daily IP rate of 2,604 Mcf and 25
barrels of condensate. The Brannan #7 well marks the company’s
ninth consecutive successful completion in the Vicksburg formation
on its La Copita acreage. In addition to the Brannan #7 well, the
company also drilled 12 wells in its mature oil fields area of
Electra/Burkburnett in North Texas during the fourth quarter.
Early 2010 Operations Update
South Texas Drilling Activity Continues on Track with 2010
Budget
In keeping with the company’s increased capital spending budget
of $50 million for 2010, which has allocated $22 million to its
play in South Texas, RAM has continued to drill at an active pace
as it enters 2010. In early January 2010 RAM spud the
Garza-Hitchcock #21 well, a 9,800 foot Vicksburg test which was
drilled to total depth in February and is currently in the process
of being completed. The next well in the series, the Heard #4 well,
spud in February of this year. Following the Heard #4, RAM is
scheduled to spud the Garza-Hitchcock #24 well in March 2010.
Winter Weather Related Disruptions Impacting Other Drilling
Activity and Production
Although activity in South Texas has been largely unaffected,
the unusually harsh winter weather in North Texas and Oklahoma
continued to slow drilling and workover activity and impacted
production facilities in these operating areas. While it is early
in the year and some of the drilling and workover activity
interrupted by weather could catch up to budgeted plans, the
company may not be able to fully replace production temporarily
shut-in resulting from the weather.
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, reserves, including prior year
reserves, alternative reserve calculations, the reconciliation of
reserve quantities, estimates of PV-10, prices of oil and gas, the
impact of weather on estimates of drilling activity, production and
guidance targets and events or developments that the company
expects or believes are forward-looking statements. Although RAM
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, developmental, exploitation and
exploration successes, actions taken and to be taken by governments
as a result of political and economic conditions or other factors,
inflation rates, 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 is an independent energy company engaged in the acquisition,
development, exploitation and exploration of oil and gas properties
and the marketing of natural gas and crude oil. Company
headquarters are in Tulsa, Oklahoma, and its common shares are
traded on the Nasdaq Exchange under the symbol RAME. For additional
information, visit the company website at www.ramenergy.com.
TABLE 1 Proved
Reserves (SEC Case) Oil Gas Ngl.
Equivalent Reserve PV10 (MBbl)
(MMcf) (MBbl) (MBOE)
% M$ Year-End 2009 PDP 8,206 40,203
2,721 17,627 52 201,254 PDNP 608 5,955 67 1,668 5 21,262 PUD 5,253
43,069 2,195 14,626 43 113,537
Total Proved (1) 14,067 89,227 4,983 33,921 100 336,053
Developed 8,814 46,158 2,788 19,295 57 222,516
Year-End
2008 Total Proved (2)(3) 14,285 96,952 4,325 34,769 100 322,131
Proved Reserves (NYMEX Strip Case) Oil
Gas Ngl. Equivalent Reserve PV10
(MBbl) (MMcf) (MBbl)
(MBOE) % M$ Year-End 2009
Total Proved (4) 16,154 103,132 5,542 38,884 100 681,992
2009 Preliminary Reserve Reconciliation
Equivalent (MBOE) Total Proved
As of December 31, 2008
34,769 Ext., discoveries, and Additions
3,957 Purchases 0 Sales (678) Price Revisions 878 Production
(2,542) Revisions of previous estimates (2,463)
As of December
31, 2009 33,921 (1) Reserve estimates as
of December 31, 2009, have been prepared under the SEC's new rules
for oil and gas reporting that are effective for fiscal years
ending on or after December 31, 2009. These new rules require SEC
reporting companies to prepare their reserve estimates using, among
other things, revised reserve definitions and revised pricing based
on 12-month unweighted NYMEX first-day-of-the-month average
pricing, instead of the prior requirement to use pricing at the end
of the period. Prices used to calculate 2009 year-end proved
reserves were $61.18/Bbl of oil and $3.87/MCF. (2) Prices used to
calculate 2008 year-end reserves were $44.60/Bbl of oil and
$5.71/Mcf of natural gas and reflect the price of oil and natural
gas on December 31, 2008. (3) 2008 Proved Reserves and PV-10
Restated pursuant to a 10-K/A of December 4, 2009. (4) Estimates of
proved reserves computed using NYMEX Strip Prices for 36 months
from December 31, 2009 with costs held constant.
TABLE 2
Fourth
Quarter Production Breakdown by Area
Developing Fields
Mature Oil
Fields*
MatureNatural Gas
Fields
Three Months Ended December 31, 2009 South
Texas Barnett Shale Appalachia
Various Various Total
Aggregate Net Production Oil (MBbls) 17 2 - 231 30
280
NGLs (MBbls) 35 30 - 16 22 103
Natural Gas (MMcf)
558 176 15 65 522
1,336
MBoe 144 61
3 258 138 604
Three Months Ended December 31, 2008 Aggregate Net
Production Oil (MBbls) 11 3 1 262 17 294
NGLs
(MBbls) 29 41 - 21 17 108
Natural Gas (MMcf) 588
258 32 455 183
1,516
MBoe 137 87
6 358 65 653
Change in MBoe 7 (26 ) (3 ) (100 ) 73 (49 )
Percentage
Change in MBoe 5.1 % -29.9 % -50.0 % -27.9 % 112.3 % -7.5 %
*Includes Electra/Burkburnett, Allen/Fitts and Layton
Fields.
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