RAM Energy Resources, Inc. (NASDAQ:RAME) today announced first
quarter 2011 earnings results.
Highlights of 1Q2011
- RAM’s percentage of production
attributable to oil and NGLs rises to 70%; accounts for 89% of
sales revenue
- RAM accelerates drilling activity in
its Osage exploration play
- RAM completes new $250 million credit
facility with borrowing base of $150 million and new term loan
facility of $75 million
Higher Prices for Oil and NGLs Add to impact of Sales and
Production Mix
Despite a production decline of more than 16% on a pro-forma
basis, oil and gas sales of $ 25.7 million in the current year’s
first quarter were only 3% less than oil and gas sales in the
year-ago quarter, pro-forma the sale of non-core assets in 2010
(See Table in Results of Operations – Pro-Forma). The decline in
production was substantially offset by higher prices for oil and
natural gas liquids (NGLs).
During the first quarter of the current year, 70% of RAM’s
production mix and approximately 89% of oil and natural gas sales
were derived from oil and natural gas liquids (NGLs). The average
price received for crude oil in the 2011 first quarter was $91.95
per barrel, 21% above that of the year-ago quarter. Similarly, the
average price received for NGLs increased 28% over the first
quarter of 2010. The average price received for natural gas was
$4.07 per Mcf during this year’s first quarter compared to $5.07
per Mcf last year.
Mississippian Oil Play Update
RAM’s initial plan to drill a total of 11 wells and one
saltwater disposal well over the course of the 2011 year in its
Mississippian oil play in Osage County, Oklahoma is being
accelerated. During the period January through April 2011, the
company has drilled or is preparing to drill 7 exploratory wells
along with the planned saltwater disposal well. These wells and
their current status are as follows:
1.
Farmland #1 NW/4 26-26N-9E Testing Mississippian 2. Surber 2T SW/4
26-26N-9E Testing Mississippian 3. Surber 2-27 SW/4 27-26N-9E Pipe
set, waiting on completion 4. Farmland 2-16 SE/4 16-26N-9E Pipe
set, waiting on completion 5. Christenson 3-2 SW/4 2-26N-9E Pipe
set, waiting on completion 6. Surber 1-35 NW/4 35-26N-9E Moving in,
rigging up, preparing to spud 7. Rickets 2-35 NE/4 35-26N-9E
Waiting on rig after Surber 1-35
In addition, the company completed the drilling of the Surber #3
saltwater disposal well (SWD) which has greatly facilitated the
ability to test and complete the drilled wells. In the third
quarter 2011 the company plans to drill four additional exploration
wells, three of which will test the northern boundaries of the
Phase I 3-D seismic acquisition. If commercial potential exists,
then RAM is likely to drill another SWD well to service these
wells. All locations have been staked and permits applied for.
Results of Operations - Pro-Forma
In December 2010, the company sold non-core producing assets
located in Texas and Oklahoma as part of its strategy aimed at
reducing debt. The following table provides pro-forma results for
2010, excluding the sold properties, to assist in the company’s
description of the results of its operations:
Three months ended March 31, 2010 1Q
2010 Results from 1Q 2010 As Reported
Sold Properties
Pro-Forma Oil and natural gas sales (in thousands): Oil $
19,488 $ 331 $ 19,157 Natural Gas 6,429 1,630 4,799 NGL 3,931 1,482
2,449 Total oil and natural gas sales $ 29,848 $ 3,443 $ 26,405
Production expenses (in thousands): Oil and natural gas
production taxes $ 1,594 $ 128 $ 1,466 Oil and natural gas
production expenses $ 7,920 $ 491 $ 7,429 Production
volumes: Texas (Mboe) 385 85 300 Oklahoma (Mboe) 119 19 100 Other
(MBOE) 62 - 62 Total Production (Mboe) 566 104
462
Production
Production of 387,000 BOE in the first quarter 2011 was 16%, or
75,000 BOE, below first quarter 2010 pro-forma production of
462,000 BOE. Of the decline in BOE, production from the Texas
fields accounted for 60,000 BOE, with normal field declines and
well performance in RAM’s South Texas properties being the largest
contributors. Normal production declines in the company’s Oklahoma
fields contributed another 10,000 BOE to the quarter-to-quarter
decline.
Costs and Expenses
Production expenses (oil and gas production expenses and taxes)
rose 10% in the 2011 first quarter to $9.8 million compared to
expenses of $8.9 million (on a pro-forma basis) in the previous
year’s quarter, primarily due to higher workover costs in the
current year. General and administrative expenses for the first
quarter of 2011 were $3.9 million, flat with the similar quarter
last year.
On March 15, 2011 the company refinanced its senior credit
facility with a 5 year, $250 million first lien revolving credit
facility and a five and one-half year, $75 million second lien term
loan credit facility. The borrowing base under the revolving credit
facility was set at $150 million at the closing. At March 31st, the
revolving credit facility had $130 million outstanding at LIBOR
plus a 3.0% margin. The term loan credit facility had $75 million
outstanding at LIBOR plus a 9.0% margin with a 2.0% LIBOR floor;
however $50 million of the term loan balance is subject to an
interest rate swap that fixed the rate at 11.51%. As part of the
refinancing, the company was required to expense $2.7 million of
unamortized financing fees in the first quarter 2011 related to the
extinguishment of the company’s previous credit facilities. On an
ongoing basis, the company will record approximately $1.3 million
annually to interest expense for the amortization of financing fees
associated with the current credit facilities. Excluding these
expenses associated with unamortized financing fees, RAM continues
to project cash interest expense to be within the targeted $14 -
$15 million range in 2011.
1Q 2011 Financial Results
For the quarter ended March 31, 2011, RAM reported a net loss of
$9.9 million, or $0.13 per share, compared to net income of $2.4
million, or $0.03 per share, in the first quarter of 2010. The 2011
quarter results were negatively impacted by the swing from non-cash
unrealized oil and gas derivative gains of $1.9 million in the
year-ago period to non-cash unrealized oil and gas derivative
losses of $15.0 million in the 2011 period, as well as the $2.7
million of financing fees discussed above. Modified EBITDA in the
first quarter of 2011 was $13.0 million, approximately $2.7 million
less than the prior year’s first quarter. This decline was
primarily the result of the asset sales discussed previously. Free
cash flow was $7.6 million, or $0.10 per diluted share outstanding,
for the first quarter 2011 compared to $11.3 million, or $0.14 per
diluted share outstanding, for the same quarter in 2010.
1Q 2011 Capital Spending
Oil and natural gas exploration and development capital
expenditures totaled approximately $5.6 million in the first
quarter, of which $4.3 million was allocated to lower risk
development and exploitation activities, $1.1 million for
exploratory expenditures in the company’s Mississippian oil play
and $200,000 for the acquisition of proved properties. RAM
participated in the drilling of 15 gross wells during the quarter,
of which 6 wells were completed and capable of commercial
production, while the remainder were in the process of drilling,
testing or completing at the end of the period. Oil and natural gas
related capital expenditures totaled approximately $7.8 million in
the first quarter of 2010. RAM continues to expect to fund its 2011
total non-acquisition capital budget of $35.0 million with cash
flow from internal sources.
1Q 2011 Conference Call
The company’s teleconference call to review first quarter
results will be broadcast live on a listen-only basis over the
internet on Thursday, May 5, at 11:30 a.m. Eastern Daylight 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 (866) 788-0541
(domestic) or (857) 350-1679 (international) and providing
the call identifier “60109469” to the operator. An audio
replay will be available until May 12, 2011 by dialing (888)
286-8010 (domestic) or (617) 801-6888 (international)
and using pass code “69049264”.
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 planned non-acquisition capital spending, NYMEX prices
of oil, natural gas, NGLs and company realizations, the impact of
oil and gas derivatives, drilling activities, estimates of the
impact of asset sales on production and the company’s production
mix 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.
About RAM Energy Resources
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)
March 31, December 31, 2011 2010 (unaudited)
ASSETS CURRENT ASSETS: Cash and cash equivalents $ 42 $ 37
Accounts receivable: Oil and natural gas sales, net of allowance of
$50 ($50 at December 31, 2010) 10,631 9,797 Joint interest
operations, net of allowance of $479 ($479 at December 31, 2010)
624 631 Other, net of allowance of $34 ($48 at December 31, 2010)
169 155 Derivative assets - 1,340 Prepaid expenses 1,133 1,657
Deferred tax asset 5,786 3,526 Inventory 3,491 3,382 Other current
assets 229 4 Total current assets
22,105 20,529 PROPERTIES AND EQUIPMENT, AT COST: Proved oil and
natural gas properties and equipment, using full cost accounting
694,759 689,472 Other property and equipment 10,203
10,072 704,962 699,544 Less accumulated depreciation,
amortization and impairment (494,820 ) (489,634 )
Total properties and equipment 210,142 209,910 OTHER ASSETS:
Deferred tax asset 33,881 31,001 Derivative assets 124 - Deferred
loan costs, net of accumulated amortization of $53 ($5,012 at
December 31, 2010) 6,659 2,609 Other 991 952
Total assets $ 273,902 $ 265,001
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT
LIABILITIES: Accounts payable: Trade $ 14,566 $ 17,149 Oil and
natural gas proceeds due others 9,039 9,414 Other 239 452 Accrued
liabilities: Compensation 1,716 1,948 Interest 563 2,448 Income
taxes 784 699 Other 10 10 Derivative liabilities 7,101 - Asset
retirement obligations 536 639 Long-term debt due within one year
136 127 Total current liabilities
34,690 32,886 DERIVATIVE LIABILITIES 7,778 203 LONG-TERM DEBT
205,240 196,965 ASSET RETIREMENT OBLIGATIONS 31,173 30,770 OTHER
LONG-TERM LIABILITIES 10 10 COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT): Common stock, $0.0001 par value,
100,000,000 shares authorized, 82,566,579 and 82,597,829 shares
issued, 78,333,803 and 78,386,983 shares outstanding at March 31,
2011 and December 31, 2010, respectively 8 8 Additional paid-in
capital 226,840 226,042 Treasury stock - 4,232,776 shares
(4,210,846 shares at December 31, 2010) at cost (7,019 ) (6,976 )
Accumulated deficit (224,818 ) (214,907 )
Stockholders' equity (deficit) (4,989 ) 4,167
Total liabilities and stockholders' equity (deficit) $ 273,902
$ 265,001
RAM Energy Resources, Inc.
Condensed Consolidated Statements of
Operations
(In thousands, except share and per
share amounts)
(unaudited)
Three months ended March 31, 2011 2010 REVENUES AND
OTHER OPERATING INCOME: Oil and natural gas sales Oil $ 20,412 $
19,488 Natural gas 2,892 6,429 NGLs 2,415
3,931 Total oil and natural gas sales 25,719 29,848 Realized
gains (losses) on derivatives 836 (898 ) Unrealized gains (losses)
on derivatives (14,953 ) 1,935 Other 51 36
Total revenues and other operating income 11,653 30,921
OPERATING EXPENSES: Oil and natural gas production taxes
1,411 1,594 Oil and natural gas production expenses 8,375 7,920
Depreciation and amortization 5,273 6,714 Accretion expense 402 382
Share-based compensation 669 686
General and administrative, overhead and
other expenses, net of operator's overhead fees
3,878 3,770 Total operating expenses
20,008 21,066 Operating income (loss)
(8,355 ) 9,855 OTHER INCOME (EXPENSE): Interest expense
(6,550 ) (5,635 ) Interest income - 2 Loss on interest rate
derivatives (133 ) - Other income (expense) 48
(9 ) INCOME (LOSS) BEFORE INCOME TAXES (14,990 ) 4,213 INCOME TAX
PROVISION (BENEFIT) (5,079 ) 1,795 Net income
(loss) $ (9,911 ) $ 2,418 BASIC INCOME (LOSS) PER
SHARE $ (0.13 ) $ 0.03 BASIC WEIGHTED AVERAGE SHARES
OUTSTANDING 78,359,996 77,997,063
DILUTED INCOME (LOSS) PER SHARE $ (0.13 ) $ 0.03
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 78,359,996
77,997,063
RAM Energy Resources, Inc.
Condensed Consolidated Statements of
Cash Flows
(In thousands)
(unaudited)
Three months ended March 31, 2011 2010
OPERATING
ACTIVITIES: Net income (loss) $ (9,911 ) $ 2,418 Adjustments to
reconcile net income (loss) to net cash provided by operating
activities- Depreciation and amortization 5,273 6,714 Amortization
of deferred loan costs 2,662 522 Non-cash interest 362 765
Accretion expense 402 382 Unrealized (gain) loss on commodity
derivatives, net of premium amortization 15,870 (967 ) Unrealized
loss on interest rate derivatives 122 - Deferred income tax
provision (benefit) (5,140 ) 1,554 Share-based compensation 669 686
Gain on disposal of other property, equipment and subsidiary (17 )
(23 )
Changes in operating assets and
liabilities, net of acquisitions
Accounts receivable (841 ) 840 Prepaid expenses, inventory and
other assets 152 272 Derivative premiums (111 ) (990 ) Accounts
payable and proceeds due others (3,155 ) (3,650 ) Accrued
liabilities and other (2,107 ) (888 ) Income taxes payable 85 177
Asset retirement obligations (111 ) - Total
adjustments 14,115 5,394 Net cash
provided by operating activities 4,204 7,812
INVESTING ACTIVITIES: Payments for oil and natural
gas properties and equipment (5,620 ) (7,821 ) Proceeds from sales
of oil and natural gas properties 462 458 Payments for other
property and equipment (219 ) (254 ) Proceeds from sales of other
property and equipment 11 4 Net cash
used in investing activities (5,366 ) (7,613 )
FINANCING ACTIVITIES: Payments on long-term debt (216,142 )
(10,034 ) Proceeds from borrowings on long-term debt 224,064 10,131
Payments for deferred loan costs (6,712 ) - Stock repurchased
(43 ) (324 ) Net cash provided by (used in) financing
activities 1,167 (227 ) INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 5 (28 ) CASH AND CASH EQUIVALENTS,
beginning of period 37 129 CASH AND
CASH EQUIVALENTS, end of period $ 42 $ 101
SUPPLEMENTAL CASH FLOW INFORMATION: Cash (received) paid for income
taxes $ (23 ) $ 64 Cash paid for interest $ 5,355 $
4,347 DISCLOSURE OF NON CASH INVESTING AND FINANCING
ACTIVITIES: Asset retirement obligations $ 5 $ 35
RAM Energy Resources, Inc.
Production by Area
Texas Oklahoma
Louisiana Other
Total Three Months Ended March 31, 2011
Aggregate Net Production Oil (MBbls) 125 74 16 7 222 NGLs (MBbls)
41 3 - 3 47 Natural Gas (MMcf) 444 80 153 33
710 MBoe 240 90 42 15 387
Texas
Oklahoma Louisiana
Other Total Three Months
Ended March 31, 2010 Aggregate Net Production Oil (MBbls) 149 81 17
10 257 NGLs (MBbls) 92 3 - 3 98 Natural Gas (MMcf) 864 212
155 38 1,269 MBoe 385 119
43 19 566 Change in MBoe (145 ) (29 )
(1 ) (4 ) (179 )
RAM Energy
Resources, Inc. Production and Prices Summary
For the Three Months Ended March 31, %
2011 2010 Incr/Dec Production
volumes: Oil (MBbls) 222 257 -13.6 % NGL (MBbls) 47 98 -52.0 %
Natural gas (MMcf) 710 1,269 -44.1 % Total (Mboe) 387 566 -31.6 %
Average sale prices received: Oil (per Bbl) $ 91.95 $ 75.83
21.3 % NGL (per Bbl) $ 51.38 $ 40.11 28.1 % Natural gas (per Mcf) $
4.07 $ 5.07 -19.7 % Total per Boe $ 66.46 $ 52.73 26.0 %
Cash effect of derivative contracts: Oil (per Bbl) $ (4.58 ) $
(3.84 ) 19.3 % NGL (per Bbl) $ - $ - - Natural gas (per Mcf) $ 2.61
$ 0.07 NM Total per Boe $ 2.16 $ (1.59 ) NM Average prices
computed after cash effect of settlement of derivative contracts:
Oil (per Bbl) $ 87.37 $ 71.99 21.4 % NGL (per Bbl) $ 51.38 $
40.11 28.1 % Natural gas (per Mcf) $ 6.68 $ 5.14 30.0 % Total per
Boe $ 68.62 $ 51.14 34.2 % Cash expenses (per Boe): Oil and
natural gas production taxes $ 3.65 $ 2.82 29.4 % Oil and natural
gas production expenses $ 21.64 $ 13.99 54.7 % General and
administrative $ 10.02 $ 6.66 50.5 % Interest $ 13.84 $ 7.68 80.2 %
Taxes $ (0.06 ) $ 0.11 -154.5 % Total per Boe $ 49.09 $
31.26 57.0 %
RAM Energy Resources, Inc.Modified
EBITDA, Free Cash Flow and Adjusted Net Income(non-GAAP
measures)(unaudited)
Non-GAAP Financial Measures
Modified 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, unrealized gains or losses on derivatives. Free
cash flow is also a non-GAAP measure representing Modified EBITDA
after adjustments for the cash portion of interest and income
taxes. 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 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 3/31/2011 3/31/2010 Modified
EBITDA: Net income (loss) $ (9,911 ) $ 2,418 Plus: Interest expense
$ 3,384 $ 4,348 Plus: PIK interest $ 448 $ 765 Plus: Amortization
of deferred loan costs $ 2,718 $ 522 Plus: Depreciation,
amortization and accretion $ 5,675 $ 7,096 Plus: Share-based
compensation $ 669 $ 686 Plus: Income tax provision (benefit) $
(5,079 ) $ 1,795 Less: Unrealized (gain) loss on derivatives $
15,075 $ (1,935 ) Modified EBITDA $ 12,979 $
15,695 Less: Cash paid for interest $ 5,355 $ 4,347
Cash paid (received) for income tax $ (23 ) $ 64
Free cash flow $ 7,647 $ 11,284
Weighted average shares outstanding - basic 78,360 77,997
Weighted average shares outstanding - diluted 78,360 77,997
Free cash flow per share - basic $ 0.10 $ 0.14 Free cash flow per
share - diluted $ 0.10 $ 0.14
Ram Energy Resources, Inc. (MM) (NASDAQ:RAME)
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