RAME Ram Energy Resources, Inc. (MM)

RAM Energy Resources, Inc. (Nasdaq: RAME) today announced fourth quarter and year ended December 31, 2009 earnings and operating results.

2009 Highlights

• Production for the 2009 year again reached the 2.5 million BOE threshold, approximately even with the level achieved in 2008 despite a significant reduction in the capital budget and the sale of producing assets
• Free cash flow was $44.6 million, or $0.57 per share, fully funding the capital budget and a modest reduction in long term debt
• Total interest expense declined $5.6 million, or 23%, compared to the prior year
• Total cash operating expenses declined $9.4 million, or 14%

“Despite the highly uncertain commodity pricing environment during much of the year, we met our key goals of maintaining aggregate production with the prior year’s record high level and maintained ample financial flexibility throughout the difficult year. Our deep inventory of attractive, lower-risk projects coupled with the 99% drilling success we recorded allowed reserve adds to replace 156% of 2009 production, preserving company asset value. A reduced capital budget and lower activity level provided an opportunity to expand our inventory of identified projects and position the company for a step up in growth in 2010,” said Larry Lee, Chairman and CEO.

Fourth Quarter 2009 Financial and Operating Results

The company recorded a loss of $12.6 million in the fourth quarter, or $0.16 a share, including a $9.5 million charge to income tax expense resulting from a determination that the company may not be able to realize the benefit of its accumulated net operating losses before they expire under IRS regulations and $4.5 million of unrealized losses on derivative positions. For the same quarter of 2008, the company reported a loss of $152.1 million, or $1.94 a share. The loss in 2008 includes a non-cash impairment of $269.9 million reflecting the impact of lower hydrocarbon prices prevailing at year end on the carrying value of our oil and gas properties, an unrealized gain of $38.0 million on derivatives and $6.4 million in litigation settlement. After adjusting for these charges in both years, the adjusted loss for the fourth quarter 2009 was $337,000, or breakeven on a per share basis, compared to $57,000 in 2008.

Production declined 8% (approximately 5% after adjusting for the sale of producing properties in July 2009) to 604,000 BOE but the impact was more than offset by an 18% higher average price per BOE compared to the fourth quarter of 2008. Higher prices for oil and natural gas liquids drove total sales to $29.7 million compared to $27.4 million in the year-ago quarter.

Production taxes rose 34% to $2.2 million as a result of higher average prices for oil and NGLs in the 2009 quarter. Production expenses fell 11% to $8.5 million as a result of cost reduction efforts instituted compared to the same period in 2008. Interest expense rose 16% to $5.8 million compared to $5.0 million in the fourth quarter of last year, principally a result of higher interest rates under the Second Amendment to our credit facility executed in the second quarter of 2009. In aggregate, cash expenses and the cash portion of interest expense per BOE during the quarter were $31.91, about even with $31.45 in the fourth quarter of 2008.

EBITDA for the quarter was $15.1 million compared to $16.2 million in last year’s quarter. Similarly, free cash flow for the fourth quarter 2009 was $10.8 million, or $0.14 per share, compared to $11.1 million, or $0.14 per share, in the year-ago quarter.

Financial and Operating Results for the 2009 Year

Production and Revenues

Total production for the year was 2.5 million BOE, essentially even with the prior year. Average prices for RAM’s production were down across the board with the average price per BOE down 46% for the year. The average price realized for oil fell 41%, the price for NGLs declined 46% and the price received for natural gas dropped by 56%. The negative impact of the drop in hydrocarbon prices in combination with the static production volumes resulted in oil and natural gas sales for the year totaling $98.2 million, down 46% from $182.7 million in 2008.

Costs and Expenses

Production taxes fell 49% to $5.3 million, primarily as a result of lower hydrocarbon prices during the year. Production expense decreased by 2% to $37.5 million. General and administrative expenses declined 18% to $16.7 million, primarily due to a decrease in professional fees and reduced employee costs. Interest expense declined 23% to $18.6 million, the product of lower effective interest rates, particularly during the first half of the year and lower outstanding debt balances. Mirroring the decline on an absolute dollar basis in each of these categories, cash expenses measured on a per BOE basis declined 23% to $28.78 as compared with 2008. In contrast, the average price per BOE realized, including the $7.57 per BOE of positive impact of settlement of derivative contracts was $46.19 for the 2009 year compared with $67.42 for the 2008 year.

For 2009 RAM reported a net loss of $58.4 million, or $0.75 a share. The loss for 2009 included an impairment charge of $47.6 million recorded in the first quarter recognizing the impact from recession induced lower hydrocarbon prices on the carrying value of oil and gas properties and unrealized non-cash losses from derivatives of $30.6 million. In addition the company recognized a tax benefit of $16.3 million which included $9.5 million in tax expense resulting from an increase in the company’s valuation allowance. The valuation allowance was increased during 2009 because the company determined it may not be able to realize a benefit from all of its net operating losses before they expire under IRS regulations. The reduction in the company’s effective tax rate to 22% for the year was primarily due to the increase in the valuation allowance. By comparison, for the 2008 year RAM reported a net loss of $130.0 million, or $1.80 a share which included a non-cash impairment of $269.9 million, unrealized gains from derivatives of $33.3 million most of which was incurred in the fourth quarter of the year as a result of the substantial drop in the price of oil and natural gas from their mid-year peaks and a litigation settlement charge of $13.2 million. Adjusted net income for 2009, considering the tax effected adjustments associated with the impairment, the unrealized loss on derivatives and the increase in valuation allowance was $680,000, or $0.01 a share. Adjusted net income for 2008, considering the tax effected adjustments associated with the impairment, litigation settlement and derivative gains, was $29.2 million, or $0.40 a share.

EBITDA for the 2009 year fell 44%, consistent with the decrease in hydrocarbon prices, to $58.3 million compared to $103.6 million in 2008. Similarly, free cash flow was $44.6 million, or $0.57 per share for the 2009 year compared to $77.1 million, or $1.07 per share, for 2008.

RAM to Webcast Conference Call to Review Fourth Quarter and Year-End 2009 Results

The company’s teleconference call to review fourth quarter and year-end 2009 results will be broadcast live on a listen-only basis over the internet on Wednesday, March 10, at 9:00 a.m. Central Standard Time. Interested parties may access the webcast by visiting the RAM Energy Resources, Inc. website at www.ramenergy.com. The teleconference may be accessed by dialing (800)299-6183(domestic) or (617)801-9713 (international) and providing the call pass code “31203912” to the operator. An audio replay will be available until March 17, 2010 by dialing (888)286-8010 (domestic) or (617)801-6888(international) and using call pass code “12806080”.

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 adjusted financial results, capital spending, prices of oil and gas and company realizations, the impact of oil and gas derivatives, drilling activities 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. Consolidated Statements of Operations (in thousands, except share and per share amounts)  

Three months ended

December 31,

 

Twelve months ended

December 31,

  2009     2008     2009     2008   (unaudited) (unaudited) REVENUES AND OTHER OPERATING INCOME: Oil and natural gas sales Oil $ 20,541 $ 16,909 $ 66,281 $ 117,036 Natural gas 5,254 7,677 20,818 47,884 NGLs   3,934     2,825     11,068     17,770   Total oil and natural gas sales 29,729 27,411 98,167 182,690 Realized gains (losses) on derivatives 223 4,118 19,255 (10,472 ) Unrealized gains (losses) on derivatives (4,476 ) 38,022 (30,561 ) 33,257 Other   40     102     217     382   Total revenues and other operating income   25,516     69,653     87,078     205,857     OPERATING EXPENSES: Oil and natural gas production taxes 2,201 1,640 5,320 10,480 Oil and natural gas production expenses 8,479 9,523 37,455 38,030 Depreciation and amortization 7,273 13,755 31,650 46,512 Accretion expense 527 577 1,976 2,207 Impairment - 269,886 47,613 269,886 Share-based compensation 547 482 2,179 2,563 General and administrative, overhead and other expenses, 4,330 4,287 16,667 20,305 net of operator's overhead fees         Total operating expenses   23,357     300,150     142,860     389,983   Operating income (loss)   2,159     (230,497 )   (55,782 )   (184,126 )   OTHER INCOME (EXPENSE): Interest expense (5,820 ) (5,006 ) (18,590 ) (24,182 ) Interest income 13 22 82 208 Other income (expense)   89     (6,449 )   (440 )   (13,536 ) LOSS BEFORE INCOME TAXES   (3,559 )   (241,930 )   (74,730 )   (221,636 )   INCOME TAX PROVISION (BENEFIT)   9,062     (89,874 )   (16,347 )   (91,683 )   NET LOSS $ (12,621 ) $ (152,056 ) $ (58,383 ) $ (129,953 )     LOSS PER SHARE: Basic $ (0.16 ) $ (1.94 ) $ (0.75 ) $ (1.80 ) Diluted $ (0.16 ) $ (1.94 ) $ (0.75 ) $ (1.80 )   WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 76,876,320 78,561,782 77,601,057 72,234,750 Diluted 76,876,320 78,561,782 77,601,057 72,234,750        

RAM Energy Resources, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

  As of December 31,   2009       2008   ASSETS CURRENT ASSETS: Cash and cash equivalents $ 129 $ 164 Cash, restricted - 16,000 Accounts receivable: Oil and natural gas sales, net of allowance of $50 ($50 at December 31, 2008) 12,585 8,702 Joint interest operations, net of allowance of $641 ($515 at December 31, 2008) 1,303 818 Other, net of allowance of $48 ($35 at December 31, 2008) 193 4,045 Derivative assets - 21,006 Prepaid expenses 1,970 2,330 Deferred tax asset 3,531 - Inventory 3,900 4,116 Other current contingencies - 2,816 Other current assets   27     25   Total current assets 23,638 60,022 PROPERTIES AND EQUIPMENT, AT COST: Proved oil and natural gas properties and equipment, using full cost accounting 702,502 683,341 Other property and equipment   9,337     9,460   711,839 692,801 Less accumulated depreciation, amortization and impairment   (462,541 )   (383,476 ) Total properties and equipment 249,298 309,325 OTHER ASSETS: Deferred tax asset 31,573 24,018 Derivative assets - 4,531 Deferred loan costs, net of accumulated amortization of $2,924 ($1,282 at December 31, 2008) 4,697 4,015 Other   1,956     2,053   Total assets $ 311,162   $ 403,964     LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Accounts payable: Trade $ 15,697 $ 26,370 Oil and natural gas proceeds due others 10,113 7,218 Other 636 982 Accrued liabilities: Compensation 2,664 2,893 Interest 2,933 865 Franchise taxes - 1,300 Income taxes 655 399 Contingencies - 16,000 Other 10 - Deferred income taxes - 5,779 Derivative liabilities 4,471 - Asset retirement obligations 711 1,093 Long-term debt due within one year   126     160   Total current liabilities 38,016 63,059 OIL & NATURAL GAS PROCEEDS DUE OTHERS - 2,523 DERIVATIVE LIABILITIES 358 - LONG-TERM DEBT 246,041 250,536 ASSET RETIREMENT OBLIGATIONS 26,363 29,106 OTHER LONG-TERM LIABILITIES 10 - COMMITMENTS AND CONTINGENCIES 900 900   STOCKHOLDERS' EQUITY (DEFICIT): Common stock, $0.0001 par value, 100,000,000 shares authorized, 80,748,674 and 79,423,574 shares issued, 76,951,883 and 78,532,134 shares outstanding at December 31, 2009 and 2008, respectively 8 8 Additional paid-in capital 222,979 220,800 Treasury stock - 3,796,791 shares (891,440 shares at December 31,2008) at cost (6,189 ) (4,027 ) Accumulated deficit   (217,324 )   (158,941 ) Stockholders' equity (deficit)   (526 )   57,840   Total liabilities and stockholders' equity (deficit) $ 311,162   $ 403,964          

RAM Energy Resources, Inc.

Consolidated Statements of Cash Flows

(in thousands)

  Years ended December 31,   2009       2008   OPERATING ACTIVITIES: Net loss $ (58,383 ) $ (129,953 ) Adjustments to reconcile net loss to net cash provided by operating activities- Depreciation and amortization 31,650 46,512 Amortization of deferred loan costs and Senior Notes discount 1,642 1,197 Non-cash interest 1,605 - Accretion expense 1,976 2,207 Impairment 47,613 269,886 Unrealized (gain) loss on derivatives, net of premium amortization 32,147 (31,762 ) Deferred income tax benefit (16,865 ) (92,595 ) Other expense 448 13,184 Share-based compensation 2,179 2,563 Loss (gain) on disposal of other property, equipment and subsidiary 35 180 Undistributed losses on investment - 165 Changes in operating assets and liabilities, net of acquisitions Accounts receivable (650 ) 4,168 Prepaid expenses, inventory and other assets 905 (4,283 ) Derivative premiums (1,781 ) (2,288 ) Accounts payable and proceeds due others (10,641 ) 14,606 Accrued liabilities and other (15,387 ) (3,124 ) Restricted cash 16,000 (16,000 ) Income taxes payable 256 231 Asset retirement obligations   (377 )   (440 ) Total adjustments   90,755     204,407   Net cash provided by operating activities 32,372 74,454   INVESTING ACTIVITIES: Payments for oil and natural gas properties and equipment (29,871 ) (84,723 ) Proceeds from sales of oil and natural gas properties 6,120 2,950 Payments for other property and equipment (604 ) (1,275 ) Proceeds from sales of other property and equipment 434 23 Proceeds from sale of subsidiary, net of cash - 308 Acquisition of Ascent, net of cash acquired - 35 Other investments   -     114   Net cash used in investing activities   (23,921 )   (82,568 )   FINANCING ACTIVITIES: Payments on long-term debt (36,156 ) (175,306 ) Proceeds from borrowings on long-term debt 30,022 90,253 Payments for deferred loan costs (2,324 ) (74 ) Stock repurchased (28 ) (82 ) Warrants exercised   -     86,614   Net cash provided by (used in) financing activities (8,486 ) 1,405 DECREASE IN CASH AND CASH EQUIVALENTS (35 ) (6,709 ) CASH AND CASH EQUIVALENTS, beginning of year   164     6,873   CASH AND CASH EQUIVALENTS, end of year $ 129   $ 164          

RAM Energy Resources, Inc.

Consolidated Statements of Cash Flows (continued)

(in thousands)

  Years ended December 31,   2009       2008 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for income taxes $ 303   $ 682 Cash paid for interest $ 13,428   $ 25,813   DISCLOSURE OF NON CASH INVESTING AND FINANCING ACTIVITIES: Payment-in-kind interest $ 1,605   $ - Asset retirement obligations $ (4,724 ) $ 787 Receipt of common stock for settlement of contingent receivable $ 2,134   $ -              

RAM Energy Resources, Inc.

Production by Area

 

Developing Fields MatureOil Fields* MatureNatural Gas Fields South Texas   Barnett Shale   Appalachia Various Various Total Year Ended December 31, 2009   Aggregate Net Production Oil (MBbls) 62 8 1 957 110 1,138 NGLs (MBbls) 122 124 - 78 82 406 Natural Gas (MMcf) 2,105 780 81 595 2,433 5,994   MBoe 534 262 15 1,134 597 2,542   Year Ended December 31, 2008 Aggregate Net Production Oil (MBbls) 49 7 1 977 153 1,187 NGLs (MBbls) 113 85 - 81 75 354 Natural Gas (MMcf) 2,587 576 62 1,046 1,811 6,082   MBoe 593 188 11 1,232 530 2,554   Change in MBoe (59) 74 4 (98) 67 (12) Percentage Change in MBoe -9.9 % 39.4 % 36.4 % -8.0 % 12.6% -0.5 %  

* Includes Electra/Burkburnett, Allen/Fitts and Layton fields.

         

RAM Energy Resources, Inc.

Production and Prices Summary

  For the Three Months Ended Increase For Year Ended Increase December 31, (Decrease) December 31, (Decrease)   2009       2008 %     2009     2008   %       Production volumes (ties to Production Tables): Oil (MBbls) 280 293 -4 % 1,138 1,187 -4 % NGL (MBbls) 103 108 -5 % 406 354 15 % Natural gas (MMcf) 1,336 1,517 -12 % 5,994 6,082 -1 % Total (Mboe) 604 653 -8 % 2,542 2,554 0 %   Average sale prices received: Oil (per Bbl) $ 73.36 $ 57.56 27 % $ 58.24 $ 98.59 -41 % NGL (per Bbl) $ 38.19 $ 26.32 45 % $ 27.26 $ 50.24 -46 % Natural gas (per Mcf) $ 3.93 $ 5.05 -22 % $ 3.47 $ 7.87 -56 % Total per Boe $ 49.22 $ 41.80 18 % $ 38.62 $ 71.52 -46 %   Cash effect of derivative contracts: Oil (per Bbl) $ (1.70 ) $ 8.84 -119 % $ 4.94 $ (8.84 ) -156 % NGL (per Bbl) $ - $ - $ - $ - - Natural gas (per Mcf) $ 0.52 $ 1.00 -48 % $ 2.27 $ - - Total per Boe $ 0.37 $ 6.29 -94 % $ 7.57 $ (4.10 ) -285 %   Average prices computed after cash effect of settlement of derivative contracts: Oil (per Bbl) $ 71.66 $ 66.40 8 % $ 63.18 $ 89.75 -30 % NGL (per Bbl) $ 38.19 $ 26.32 45 % $ 27.26 $ 50.24 -46 % Natural gas (per Mcf) $ 4.45 $ 6.05 -26 % $ 5.74 $ 7.87 -27 % Total per Boe $ 49.59 $ 48.09 3 % $ 46.19 $ 67.42 -31 %   Cash expenses (per Boe): Oil and natural gas production taxes $ 3.64 $ 2.51 45 % $ 2.09 $ 4.10 -49 % Oil and natural gas production expenses $ 14.04 $ 14.55 -4 % $ 14.73 $ 14.89 -1 % General and administrative $ 7.17 $ 6.55 9 % $ 6.56 $ 7.95 -17 % Interest $ 7.31 $ 7.38 -1 % $ 5.28 $ 10.11 -48 % Taxes $ (0.25 ) $ 0.46 -154 % $ 0.12 $ 0.27 -56 % Total per Boe $ 31.91 $ 31.45 1 % $ 28.78 $ 37.32 -23 %  

RAM Energy Resources, Inc.EBITDA, Free Cash Flow and Adjusted Net Income( non-GAAP measures)(Unaudited)

Non-GAAP Financial Measures

EBITDA, a non-GAAP measure, is determined by adding the following to net income (loss): interest expense, income taxes, depreciation, amortization, accretion, share-based compensation, impairment charges and unrealized gains or losses on derivative or MTM settlement transactions. Free cash flow is also a non-GAAP measure representing EBITDA after adjustments for the cash portion of interest and income taxes. Adjusted net income is a non-GAAP measure which excludes the income tax affected impact of unrealized derivative gains or losses, MTM settlement transactions and impairment charges on GAAP income. These non-GAAP measures are 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). These non-GAAP measures are widely accepted as financial indicators of an oil and gas company’s ability to generate cash which is used to internally fund exploration and development activities and fund debt service costs. These non-GAAP measures are 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.

            $000s, except per share amounts   Qtr Ended Qtr Ended Year Ended Year Ended 12/31/2009 12/31/2008 12/31/2009 12/31/2008   EBITDA: Net loss $ (12,621 ) $ (152,056 ) $ (58,383 ) $ (129,953 ) Plus: Interest expense $ 4,522 $ 4,708 $ 15,343 $ 22,985 Plus: PIK interest $ 776 $ - $ 1,605 $ - Plus: Amortization of deferred loan costs $ 522 $ 298 $ 1,642 $ 1,197 Plus: Depreciation, amortization and accretion $ 7,800 $ 14,332 $ 33,626 $ 48,719 Plus: Share-based compensation $ 547 $ 482 $ 2,179 $ 2,563 Plus: Income tax provision (benefit) $ 9,062 $ (89,874 ) $ (16,347 ) $ (91,683 ) Plus: MTM escrowed Sacket proceeds $ - $ 6,432 $ 448 $ 13,184 Plus: Impairment charges $ - $ 269,886 $ 47,613 $ 269,886 Less: Unrealized (gain) loss on derivatives $ 4,476   $ (38,022 ) $ 30,561   $ (33,257 )   EBITDA $ 15,084 $ 16,186 $ 58,287 $ 103,641   Less:   Cash paid for interest $ 4,417 $ 4,819 $ 13,428 $ 25,813 Cash paid for income tax $ (154 ) $ 302 $ 303 $ 682           Free cash flow $ 10,821   $ 11,065   $ 44,556   $ 77,146     Weighted average shares outstanding - basic 76,876 78,562 77,601 72,235 Weighted average shares outstanding - diluted 76,876 78,562 77,601 72,235   Free cash flow per share - basic $ 0.14 $ 0.14 $ 0.57 $ 1.07 Free cash flow per share - diluted $ 0.14 $ 0.14 $ 0.57 $ 1.07     Adjusted net income (loss): Net loss $ (12,621 ) $ (152,056 ) $ (58,383 ) $ (129,953 ) Plus: NOL Valuation Allowance $ 9,509 $ 9,509 Plus: Tax effected impairment charge $ - $ 171,585

$

30,328

$

171,585 Plus: Tax effected settlement charge $ - $ 3,988

$

278

$

8,174 Plus: Tax effected unrealized (gain)loss on derivatives $ 2,775   $ (23,574 )

$

18,948  

$

(20,619 )   Adjusted net income (loss) $ (337 ) $ (57 ) $ 680   $ 29,187     Weighted average shares outstanding - basic 76,876 78,562 77,601 72,235 Weighted average shares outstanding - diluted 76,876 78,562 77,601 72,235   Adjusted net income (loss) per share - basic $ (0.00 ) $ (0.00 ) $ 0.01 $ 0.40 Adjusted net income (loss) per share - diluted $ (0.00 ) $ (0.00 ) $ 0.01 $ 0.40