The environmental religion continues to produce attacks on regular, hurting people, as they sue oil companies every time a drilling lease permit is granted to them.
"Every lease that has been granted in the last several years has been immediately challenged in the lawsuits 100 percent," said Rep. Virginia Foxx, R-N.C.
This thuggery is hurting people and will damage the lives of human beings, as environmental crackpots continue their assualt against them.
These earth and animal worshippers would rather see human beings suffer through high energy costs and inability to heat their homes, than the lie that polar bears are endangered (which has proven to be false) and other bogus claims of endangerment.
It doesn't matter to these wackos, as lying to achieve their ends is part of their way of operating.
What's more evil about this is they know they can't win, they'll only increase the cost of doing business, which is always passed on to regular people.
These people aren't real conservationists doing this, rather they are elitest who care about their earth religion rather than human beings. People continue to be an insult to their sensibilities, and they would rather see them hurt than their earth-mother.
Screw 'em. Hopefully we'll start to see true conservation groups emerge who truly care about managing our resources. Hunters and fisherman are especially concerned and good at this, knowing we need to keep our resources managed properly.
These environmental terrorists need to be sued into oblivion, and associations need to be formed in order to make that a reality.
Wednesday, November 26, 2008
Wednesday, November 19, 2008
Global National Oil Companies Look for Oil to Drop to $40 a Barrel
National oil companies from around the world said in a recent meeting in Beijing that prices would probably fall to around $40 a barrel, according to Fu Chengyu, chief executive of China National Offshore Oil Corporation.
Fu added that the tone of the meeting was one on the verge of panic, as the reality of what is happening with oil is setting in.
Commenting on the idea of OPEC to cut back more on production, Fu said that it probably won't have any significant impact on the price of oil. The major reason for that is the economic climate around the world, which is making oil nowhere near the priority of consumers, who have cut back on travel and vacationing, and are spending only on necessities.
Another outcome of this is oil companies will cut back on investing in new projects, as the current and eventual price of oil can't sustain them.
Most extraction projects were initiated assuming a minimum price of $60 a barrel to break even, and up to $90 a barrel.
“When most of the oil companies budgeted their projects, they were using $70, $80, even $100 a barrel for their cash flow calculations,” Fu said. “For those projects that have started, certainly they will try to complete them, but for those projects that have not started yet they will delay or cancel. Simply, they don’t have enough cash to do all of those that they budgeted.”
Fu added that the tone of the meeting was one on the verge of panic, as the reality of what is happening with oil is setting in.
Commenting on the idea of OPEC to cut back more on production, Fu said that it probably won't have any significant impact on the price of oil. The major reason for that is the economic climate around the world, which is making oil nowhere near the priority of consumers, who have cut back on travel and vacationing, and are spending only on necessities.
Another outcome of this is oil companies will cut back on investing in new projects, as the current and eventual price of oil can't sustain them.
Most extraction projects were initiated assuming a minimum price of $60 a barrel to break even, and up to $90 a barrel.
“When most of the oil companies budgeted their projects, they were using $70, $80, even $100 a barrel for their cash flow calculations,” Fu said. “For those projects that have started, certainly they will try to complete them, but for those projects that have not started yet they will delay or cancel. Simply, they don’t have enough cash to do all of those that they budgeted.”
Saturday, November 15, 2008
OPEC Could Cut Production by 1 Million Barrels in Cairo
Fighting to stave off oil plunging below $50 a barrel, OPEC may cut production another 1 million barrels a day.
Expectations are at the next OPEC meeting on November 29 they will definitely cut production again, the question is only by how much. The 1 million barrels a day figure is expected by most analysts; although some have said it could be anywhere from 500,000 a day to 3 million barrels a day.
The problem from OPEC's standpoint is it's one thing to announce production cuts, it's another thing to implement them, as supply cut announcements from September and October are still in the process of being put into action.
Iran is calling for cuts between 1 to 1.5 million barrels a day.
Oil futures closed Friday's session down to $57.04 a barrel for December delivery on the Nymex.
Expectations are at the next OPEC meeting on November 29 they will definitely cut production again, the question is only by how much. The 1 million barrels a day figure is expected by most analysts; although some have said it could be anywhere from 500,000 a day to 3 million barrels a day.
The problem from OPEC's standpoint is it's one thing to announce production cuts, it's another thing to implement them, as supply cut announcements from September and October are still in the process of being put into action.
Iran is calling for cuts between 1 to 1.5 million barrels a day.
Oil futures closed Friday's session down to $57.04 a barrel for December delivery on the Nymex.
Friday, November 14, 2008
Enterprise Oilfield Group, Inc. Announces Third Quarter Results
Nov 14, 2008 12:28 ETEnterprise Oilfield Group, Inc. Announces Third Quarter Results
ST. ALBERT, ALBERTA--(Marketwire - Nov. 14, 2008) - Enterprise Oilfield Group, Inc. ("Enterprise") (TSX:E). Consolidated revenue for the three months ended September 30, 2008 was $8.7 million versus $8.5 million for the comparable period in 2007. The Company had EBITDAS_ of $1.6 million and a net income of $0.6 million for the three month period ended September 30, 2008 versus EBITDAS of $1.4 million and a net income of $0.9 million for the comparable period in 2007.
For the nine month period ended September 30, 2008 consolidated revenue was $28.1 million versus $32.1 million for the comparable period in 2007. The Company had EBITDAS of $4.2 million and a net income of $1.3 million for the nine month period ended September 30, 2008 versus EBITDAS of $4.5 million and a net income of $2.0 million for the comparable period in 2007. The Interim Financial Statements and the Management Discussion and Analysis have been filed and can be viewed at www.SEDAR.com.
Outlook
Management believes the long term outlook for its business segments is positive. Although year to date operational results have been positive in the face of volatile commodity prices, global financial and economic turmoil has added to near-term uncertainty for commodity prices. Weaker commodity prices have however been buffered to a large extent by the devaluation of the Canadian dollar relative to the US dollar. Continuing credit market instability will likely adversely affect the energy industry during 2009. However, Enterprise is positioned well due to the diversity of its business and strong performance of its infrastructure services division. Enterprise has a history of success due to the commitment of its field staff to provide excellent service to its customers regardless of industry conditions, and the commitment of its management to prudent financial management. Consequently, Enterprise will continue to actively pursue opportunities to enter new geographic territories and make strategic acquisitions. While the Company is uncertain of near-term movements in the financial markets, we are well-positioned to continue generating positive growth relative to our peers. Enterprise has positioned itself for improved levels of demand for its services and will continue to pursue opportunistic growth initiatives. Management is very encouraged with its high quality people, modern equipment, and service locations. Enterprise's position in the current market place is exceptional and believes that the remainder of 2008 and into 2009 holds tremendous opportunities for continued revenue growth. From the beginning, the Company's goal has been to increase the level of customer service with the best and safest practices, the newest equipment and the best field staff. And the plan is working with great success. Enterprise has paid down over $2.4 million in long term debt during the current year through its accelerated debt repayment plan, has purchased several pieces of new equipment for the operations and is selling off older equipment in order to maintain a new, efficient and cost effective fleet. Additionally, the Company's expansion into the Peace River area has opened the door to very profitable, year round, infrastructure and facilities maintenance opportunities, smoothing out the cyclical effects of the traditional pipeline industry. As well, Peace River holds tremendous potential for pipeline services work due to all of the heavy oil production in the area.
Energy and Construction Services
Although commodity prices have been volatile in the third and fourth quarters of 2008, field activity levels in our oilfield energy and construction services division remains strong. We continue to look at growth opportunities from both an internal perspective and from an acquisition perspective.
Utility and Directional Drilling Services
A number of the Company's clients have significant backlogs of outstanding maintenance orders to replace miles of underground cable. Significant infrastructure investment from all levels of government and the Company's focus on organic growth within this sector will prove to be meaningful contributor to revenues and profitability. The Company's continued efforts to broaden its infrastructure services to a larger regional footprint have been met with success. The outlook for this sector remains strong.
Conclusion
Management believes that balanced and diversified positions in both the infrastructure and energy services sectors are the best path to generating shareholder value. The Company has hired additional management experienced in infrastructure projects to spearhead more civic-related construction and maintenance as there are inherent synergies related to the heavy equipment and crews of both sectors. Enterprise expects to continue distancing itself from its peers by delivering profits in a challenging operating environment. Over the last few quarters, Enterprise's competitive landscape has shrunk with some competing companies choosing to cease operations and exit the industry, while others were forced to file for creditor protection. Our Company will continue to exercise fiscal and operational prudence. Enterprise remains confident in its strategic and operational plans and has a seasoned leadership team to guide the Company. Enterprise is committed to the further expansion of its customer base in central and northern Alberta and strives to provide excellent customer service. Management is excited about Enterprise's future prospects.
(1) EBITDAS = Earnings Before Income Tax, Depreciation, Amortization, and Stock Based Compensation.
Forward Looking Statements
This Company Press Release contains certain "forward-looking" statements and information relating to the Company that are based on the beliefs of the Company's management as well as assumptions made by and information currently available to the Company's management. Such statements reflect the current risks, uncertainties and assumptions related to certain factors including, without limitations, competitive factors, general economic conditions, customer relations, relationships with vendors and strategic partners, the interest rate environment, governmental regulation and supervision, seasonality, technological change, changes in industry practices, and one-time events. Should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described herein.
The TSX Exchange has not reviewed and does not accept responsibility for the adequacy or the accuracy of this release.
For more information, please contact
Enterprise Oilfield Group, Inc.
Leonard D. Jaroszuk
President & CEO
(780) 418-4400 or Toll Free: 1-888-303-3361
(780) 418-1941 (FAX)
or
Enterprise Oilfield Group, Inc.
Desmond O'Kell
Vice President, Corp. Development
(780) 418-4400 or Toll Free: 1-888-303-3361
(780) 418-1941 (FAX)
Email: contact@EnterpriseOil.ca
Website: www.EnterpriseOil.ca Click here to see all recent news from this company Privacy Statement | Terms of Service | Sitemap |© 2008 Marketwire, Incorporated. All rights reserved.
Your newswire of choice for expert news release distribution.
1-800-774-9473 (US) | 1-888-299-0338 (Canada) | +44-20-7562-6550 (UK)
ST. ALBERT, ALBERTA--(Marketwire - Nov. 14, 2008) - Enterprise Oilfield Group, Inc. ("Enterprise") (TSX:E). Consolidated revenue for the three months ended September 30, 2008 was $8.7 million versus $8.5 million for the comparable period in 2007. The Company had EBITDAS_ of $1.6 million and a net income of $0.6 million for the three month period ended September 30, 2008 versus EBITDAS of $1.4 million and a net income of $0.9 million for the comparable period in 2007.
For the nine month period ended September 30, 2008 consolidated revenue was $28.1 million versus $32.1 million for the comparable period in 2007. The Company had EBITDAS of $4.2 million and a net income of $1.3 million for the nine month period ended September 30, 2008 versus EBITDAS of $4.5 million and a net income of $2.0 million for the comparable period in 2007. The Interim Financial Statements and the Management Discussion and Analysis have been filed and can be viewed at www.SEDAR.com.
Outlook
Management believes the long term outlook for its business segments is positive. Although year to date operational results have been positive in the face of volatile commodity prices, global financial and economic turmoil has added to near-term uncertainty for commodity prices. Weaker commodity prices have however been buffered to a large extent by the devaluation of the Canadian dollar relative to the US dollar. Continuing credit market instability will likely adversely affect the energy industry during 2009. However, Enterprise is positioned well due to the diversity of its business and strong performance of its infrastructure services division. Enterprise has a history of success due to the commitment of its field staff to provide excellent service to its customers regardless of industry conditions, and the commitment of its management to prudent financial management. Consequently, Enterprise will continue to actively pursue opportunities to enter new geographic territories and make strategic acquisitions. While the Company is uncertain of near-term movements in the financial markets, we are well-positioned to continue generating positive growth relative to our peers. Enterprise has positioned itself for improved levels of demand for its services and will continue to pursue opportunistic growth initiatives. Management is very encouraged with its high quality people, modern equipment, and service locations. Enterprise's position in the current market place is exceptional and believes that the remainder of 2008 and into 2009 holds tremendous opportunities for continued revenue growth. From the beginning, the Company's goal has been to increase the level of customer service with the best and safest practices, the newest equipment and the best field staff. And the plan is working with great success. Enterprise has paid down over $2.4 million in long term debt during the current year through its accelerated debt repayment plan, has purchased several pieces of new equipment for the operations and is selling off older equipment in order to maintain a new, efficient and cost effective fleet. Additionally, the Company's expansion into the Peace River area has opened the door to very profitable, year round, infrastructure and facilities maintenance opportunities, smoothing out the cyclical effects of the traditional pipeline industry. As well, Peace River holds tremendous potential for pipeline services work due to all of the heavy oil production in the area.
Energy and Construction Services
Although commodity prices have been volatile in the third and fourth quarters of 2008, field activity levels in our oilfield energy and construction services division remains strong. We continue to look at growth opportunities from both an internal perspective and from an acquisition perspective.
Utility and Directional Drilling Services
A number of the Company's clients have significant backlogs of outstanding maintenance orders to replace miles of underground cable. Significant infrastructure investment from all levels of government and the Company's focus on organic growth within this sector will prove to be meaningful contributor to revenues and profitability. The Company's continued efforts to broaden its infrastructure services to a larger regional footprint have been met with success. The outlook for this sector remains strong.
Conclusion
Management believes that balanced and diversified positions in both the infrastructure and energy services sectors are the best path to generating shareholder value. The Company has hired additional management experienced in infrastructure projects to spearhead more civic-related construction and maintenance as there are inherent synergies related to the heavy equipment and crews of both sectors. Enterprise expects to continue distancing itself from its peers by delivering profits in a challenging operating environment. Over the last few quarters, Enterprise's competitive landscape has shrunk with some competing companies choosing to cease operations and exit the industry, while others were forced to file for creditor protection. Our Company will continue to exercise fiscal and operational prudence. Enterprise remains confident in its strategic and operational plans and has a seasoned leadership team to guide the Company. Enterprise is committed to the further expansion of its customer base in central and northern Alberta and strives to provide excellent customer service. Management is excited about Enterprise's future prospects.
(1) EBITDAS = Earnings Before Income Tax, Depreciation, Amortization, and Stock Based Compensation.
Forward Looking Statements
This Company Press Release contains certain "forward-looking" statements and information relating to the Company that are based on the beliefs of the Company's management as well as assumptions made by and information currently available to the Company's management. Such statements reflect the current risks, uncertainties and assumptions related to certain factors including, without limitations, competitive factors, general economic conditions, customer relations, relationships with vendors and strategic partners, the interest rate environment, governmental regulation and supervision, seasonality, technological change, changes in industry practices, and one-time events. Should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described herein.
The TSX Exchange has not reviewed and does not accept responsibility for the adequacy or the accuracy of this release.
For more information, please contact
Enterprise Oilfield Group, Inc.
Leonard D. Jaroszuk
President & CEO
(780) 418-4400 or Toll Free: 1-888-303-3361
(780) 418-1941 (FAX)
or
Enterprise Oilfield Group, Inc.
Desmond O'Kell
Vice President, Corp. Development
(780) 418-4400 or Toll Free: 1-888-303-3361
(780) 418-1941 (FAX)
Email: contact@EnterpriseOil.ca
Website: www.EnterpriseOil.ca Click here to see all recent news from this company Privacy Statement | Terms of Service | Sitemap |© 2008 Marketwire, Incorporated. All rights reserved.
Your newswire of choice for expert news release distribution.
1-800-774-9473 (US) | 1-888-299-0338 (Canada) | +44-20-7562-6550 (UK)
Zion Oil & Gas Reports Third Quarter Results
CAESAREA, Israel, Nov 14, 2008 (BUSINESS WIRE) -- Zion Oil & Gas, Inc. (NYSE Alternext US: ZN) of Dallas, Texas and Caesarea, Israel, reported today its results for the quarter ended September 30, 2008. The company reported a net loss of $865 thousand or $(0.08) per share for the third quarter of 2008 compared to a net loss of $748 thousand or $(0.07) per share for the same quarter a year earlier. The company has no revenues as it is still an exploration stage company.
On release of the third quarter results, Zion's Chief Executive Officer, Richard Rinberg, commented: "Zion is moving forward with its exploration and drilling plans. We anticipate that the refurbished 2,000 horsepower drilling rig, with which we plan to drill Zion's planned Ma'anit-Rehoboth #2 well 'directionally' to below 18,000 feet, will be shipped into Israel during January 2009. We have almost finished preparing the drill site and expect to commence drilling shortly after the rig arrives on location. Zion's public offering of $10 units continues, in order to raise further funds for our planned multi-well drilling program."
Zion Oil & Gas, a Delaware corporation, explores for oil and gas in Israel in areas located on-shore between Haifa and Tel Aviv. It currently holds two petroleum exploration licenses, the Joseph and the Asher-Menashe Licenses, between Netanya, in the south, and Haifa, in the north, covering a total of approximately 162,000 acres.
The Company's financial statement information is summarized below:
(In thousands, except for per share income)
STATEMENT OF OPERATIONS Three months ended
September 30
2008 2007
Revenues - -
Total Expenses 853 748
Net Income (loss) (853) (748)
Earnings (loss) per common share -- basic (0.08) (0.07)
and diluted
Weighted avg. shares issued and outstanding -- 10,125 10,121
basic and diluted
CASH FLOW DATA Nine months ended
September 30
2008 2007
Net cash (used in) operating activities (3,125) (2,970)
Net cash used in investing activities (1,014) (2,653)
Net cash provided by financing activities - 8,218
BALANCE SHEET DATA September 30, 2008 December 31, 2007
Current Assets 1,392 4,716
Total Assets 5,114 7,421
Total Liabilities 2,110 1,633
Total Shareholders Equity 3,004 5,788
FORWARD LOOKING STATEMENTS: Statements in this press release that are not historical fact, including statements regarding Zion's operations and planned operations and an ability to raise additional capital, are forward-looking statements as defined in the "Safe Harbor" provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on assumptions that are subject to significant known and unknown risks, uncertainties and other unpredictable factors, many of which are described in Zion's periodic reports filed with the SEC and are beyond Zion's control. These risks could cause Zion's actual performance to differ materially from the results predicted by these forward-looking statements. Zion can give no assurance that the expectations reflected in these statements will prove to be correct and assumes no responsibility to update these statements.
NOTICE
Zion Oil & Gas, Inc. has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents the issuer has filed with the SEC for more complete information about Zion Oil & Gas and its offering. You may get these documents for free by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, Zion Oil & Gas or its underwriter will arrange to send you the prospectus if you request it by calling toll free 1-888-TX1-ZION (1-888-891-9466). Direct links to the SEC location, or to the documents in PDF, may be found on the home page of Zion Oil & Gas, Inc., at www.zionoil.com
SOURCE: Zion Oil & Gas, Inc.
Zion Oil & Gas, Inc.
Brittany Russell, 214-221-4610
brittany@zionoil.com
Copyright Business Wire 2008
On release of the third quarter results, Zion's Chief Executive Officer, Richard Rinberg, commented: "Zion is moving forward with its exploration and drilling plans. We anticipate that the refurbished 2,000 horsepower drilling rig, with which we plan to drill Zion's planned Ma'anit-Rehoboth #2 well 'directionally' to below 18,000 feet, will be shipped into Israel during January 2009. We have almost finished preparing the drill site and expect to commence drilling shortly after the rig arrives on location. Zion's public offering of $10 units continues, in order to raise further funds for our planned multi-well drilling program."
Zion Oil & Gas, a Delaware corporation, explores for oil and gas in Israel in areas located on-shore between Haifa and Tel Aviv. It currently holds two petroleum exploration licenses, the Joseph and the Asher-Menashe Licenses, between Netanya, in the south, and Haifa, in the north, covering a total of approximately 162,000 acres.
The Company's financial statement information is summarized below:
(In thousands, except for per share income)
STATEMENT OF OPERATIONS Three months ended
September 30
2008 2007
Revenues - -
Total Expenses 853 748
Net Income (loss) (853) (748)
Earnings (loss) per common share -- basic (0.08) (0.07)
and diluted
Weighted avg. shares issued and outstanding -- 10,125 10,121
basic and diluted
CASH FLOW DATA Nine months ended
September 30
2008 2007
Net cash (used in) operating activities (3,125) (2,970)
Net cash used in investing activities (1,014) (2,653)
Net cash provided by financing activities - 8,218
BALANCE SHEET DATA September 30, 2008 December 31, 2007
Current Assets 1,392 4,716
Total Assets 5,114 7,421
Total Liabilities 2,110 1,633
Total Shareholders Equity 3,004 5,788
FORWARD LOOKING STATEMENTS: Statements in this press release that are not historical fact, including statements regarding Zion's operations and planned operations and an ability to raise additional capital, are forward-looking statements as defined in the "Safe Harbor" provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on assumptions that are subject to significant known and unknown risks, uncertainties and other unpredictable factors, many of which are described in Zion's periodic reports filed with the SEC and are beyond Zion's control. These risks could cause Zion's actual performance to differ materially from the results predicted by these forward-looking statements. Zion can give no assurance that the expectations reflected in these statements will prove to be correct and assumes no responsibility to update these statements.
NOTICE
Zion Oil & Gas, Inc. has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents the issuer has filed with the SEC for more complete information about Zion Oil & Gas and its offering. You may get these documents for free by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, Zion Oil & Gas or its underwriter will arrange to send you the prospectus if you request it by calling toll free 1-888-TX1-ZION (1-888-891-9466). Direct links to the SEC location, or to the documents in PDF, may be found on the home page of Zion Oil & Gas, Inc., at www.zionoil.com
SOURCE: Zion Oil & Gas, Inc.
Zion Oil & Gas, Inc.
Brittany Russell, 214-221-4610
brittany@zionoil.com
Copyright Business Wire 2008
Saratoga Resources, Inc. Reports Third Quarter 2008 Results
Saratoga Resources, Inc. Reports Third Quarter 2008 Results
HOUSTONTX-SARATOGA-RESOURCES
HOUSTON--(BUSINESS WIRE)--
Saratoga Resources, Inc. (OTCBB: SROE) (the 'Company') today announced fiscal third quarter results for the period ended September 30, 2008.
The company reported net income for the three months ended September 30, 2008 of $6,224,842, or $0.41 per basic share and $0.36 per diluted share, on revenues of $12,550,937 as compared to a net loss of $29,452, or $0.01 per share, on revenues of $16,220 for the three months ended September 30, 2007. For the nine months ended September 30, 2008, the company reported net income of $5,907,084, or $0.48 per basic share and $0.45 per diluted share, on revenues of $12,586,046 as compared to a net loss of $62,520, or $0.01 per share, on revenues of $25,000 during the nine month period in 2007.
Results for the current quarter and year to date period reflect the acquisition by the Company of Harvest Oil & Gas and The Harvest Group in July 2008 and also reflect the effects of Hurricanes Gustav and Ike which temporarily disrupted production and resulted in an estimated $710,000 of damage to the Company south Louisiana properties. Based on daily production volumes at the time, storm-related production delays reduced production during the quarter by an estimated 19.4 Mbls of oil and 113.1 Mmcf of natural gas, resulting in an estimated reduction in revenues for the period of $3,098,600. As of September 30, 2008, production had been restored to substantially 100% of pre-hurricane levels.
'We are pleased with our results for the 2008 third quarter,' Saratoga Chairman and CEO Tom Cooke said. 'We successfully consummated our acquisition of the Harvest companies and have progressed quickly in integrating the Harvest operations and team and in commencement of our planned development of the Harvest properties. We came through two hurricanes in good condition, rapidly bringing operations back to pre-hurricane levels and, despite the lost production and revenues from the hurricanes and the incurrence of costs associated with integrating the Harvest companies, we managed to produce strong operating cash flows and profits for the period.'
About Saratoga Resources
Saratoga Resources, Inc. is an independent exploration and production company headquartered in Austin, Texas with offices in Houston, Texas and Covington, Louisiana. The Company engages in the acquisition and development of oil and gas producing properties that allow the Company to grow through low-risk development and risk-managed exploration. The Company currently operates properties in Texas and Louisiana with principal holdings covering approximately 30,000 net acres located in the state waters offshore Louisiana.
Forward-looking Statements
This press release includes certain estimates and other forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, including statements with respect to actual costs of storm-related damages, actual production volumes following the period, the company's ability to integrate the operations of the Harvest companies as well as anticipated operating and financial performance, growth opportunities, growth rates, potential acquisition opportunities, and other statements of expectation. Words such as 'expects,' 'anticipates,' 'intends,' 'plans,' 'believes,' 'assumes,' 'seeks,' 'estimates,' 'should,' and variations of these words and similar expressions, are intended to identify these forward-looking statements. While we believe these statements are accurate, forward-looking statements are inherently uncertain and we cannot assure you that these expectations will occur and our actual results may be significantly different. These statements by the Company and its management are based on estimates, projections, beliefs and assumptions of management and are not guarantees of future performance. Important factors that could cause actual results to differ from those in the forward-looking statements include the factors described in the 'Risk Factors' section of the company's filings with the Securities and Exchange Commission. The Company disclaims any obligation to update or revise any forward-looking statement based on the occurrence of future events, the receipt of new information, or otherwise.
Saratoga Resources, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 2008 and 2007
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2008 2007 2008 2007
Revenues:
Crude oil, condensate and natural gas liquids $ 10,626,472 $ - $ 10,626,472 $ -
Natural gas 1,924,465 16,220 1,959,574 25,000
Total revenues 12,550,937 16,220 12,586,046 25,000
Operating Expense:
Lease operating expense 3,598,214 13,625 3,602,888 16,740
Depreciation, depletion and amortization 5,194,983 88 5,194,983 263
General and administrative 1,643,854 18,599 1,962,590 32,625
Taxes other than income 1,424,576 - 1,424,576 -
Total operating expenses 11,861,627 32,312 12,185,037 49,628
Operating income (loss) 689,310 (16,092 ) 401,009 (24,628 )
Other income (expenses):
Commodity derivative income, net 12,855,560 - 12,855,560 -
Other income 526,839 - 526,839 -
Interest income 37,945 - 37,945 -
Interest expense (4,645,655 ) (13,360 ) (4,675,112 ) (37,892 )
Total other income (expense) 8,774,689 (13,360 ) 8,745,232 (37,892 )
Net income (loss) before income taxes 9,463,999 (29,452 ) 9,146,241 (62,520 )
Income tax provision:
Current 560,007 - 560,007 -
Deferred 2,679,150 - 2,679,150 -
Net income (loss) $ 6,224,842 $ (29,452 ) $ 5,907,084 $ (62,520 )
Net income (loss) per share:
Basic $ 0.41 $ (0.01 ) $ 0.48 $ (0.01 )
Diluted $ 0.36 $ (0.01 ) $ 0.45 $ (0.01 )
Weighted average number of common shares outstanding:
Basic 15,183,205 7,540,292 12,254,701 7,540,292
Diluted 17,058,426 7,540,292 13,199,147 7,540,292
HOUSTONTX-SARATOGA-RESOURCES
HOUSTON--(BUSINESS WIRE)--
Saratoga Resources, Inc. (OTCBB: SROE) (the 'Company') today announced fiscal third quarter results for the period ended September 30, 2008.
The company reported net income for the three months ended September 30, 2008 of $6,224,842, or $0.41 per basic share and $0.36 per diluted share, on revenues of $12,550,937 as compared to a net loss of $29,452, or $0.01 per share, on revenues of $16,220 for the three months ended September 30, 2007. For the nine months ended September 30, 2008, the company reported net income of $5,907,084, or $0.48 per basic share and $0.45 per diluted share, on revenues of $12,586,046 as compared to a net loss of $62,520, or $0.01 per share, on revenues of $25,000 during the nine month period in 2007.
Results for the current quarter and year to date period reflect the acquisition by the Company of Harvest Oil & Gas and The Harvest Group in July 2008 and also reflect the effects of Hurricanes Gustav and Ike which temporarily disrupted production and resulted in an estimated $710,000 of damage to the Company south Louisiana properties. Based on daily production volumes at the time, storm-related production delays reduced production during the quarter by an estimated 19.4 Mbls of oil and 113.1 Mmcf of natural gas, resulting in an estimated reduction in revenues for the period of $3,098,600. As of September 30, 2008, production had been restored to substantially 100% of pre-hurricane levels.
'We are pleased with our results for the 2008 third quarter,' Saratoga Chairman and CEO Tom Cooke said. 'We successfully consummated our acquisition of the Harvest companies and have progressed quickly in integrating the Harvest operations and team and in commencement of our planned development of the Harvest properties. We came through two hurricanes in good condition, rapidly bringing operations back to pre-hurricane levels and, despite the lost production and revenues from the hurricanes and the incurrence of costs associated with integrating the Harvest companies, we managed to produce strong operating cash flows and profits for the period.'
About Saratoga Resources
Saratoga Resources, Inc. is an independent exploration and production company headquartered in Austin, Texas with offices in Houston, Texas and Covington, Louisiana. The Company engages in the acquisition and development of oil and gas producing properties that allow the Company to grow through low-risk development and risk-managed exploration. The Company currently operates properties in Texas and Louisiana with principal holdings covering approximately 30,000 net acres located in the state waters offshore Louisiana.
Forward-looking Statements
This press release includes certain estimates and other forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, including statements with respect to actual costs of storm-related damages, actual production volumes following the period, the company's ability to integrate the operations of the Harvest companies as well as anticipated operating and financial performance, growth opportunities, growth rates, potential acquisition opportunities, and other statements of expectation. Words such as 'expects,' 'anticipates,' 'intends,' 'plans,' 'believes,' 'assumes,' 'seeks,' 'estimates,' 'should,' and variations of these words and similar expressions, are intended to identify these forward-looking statements. While we believe these statements are accurate, forward-looking statements are inherently uncertain and we cannot assure you that these expectations will occur and our actual results may be significantly different. These statements by the Company and its management are based on estimates, projections, beliefs and assumptions of management and are not guarantees of future performance. Important factors that could cause actual results to differ from those in the forward-looking statements include the factors described in the 'Risk Factors' section of the company's filings with the Securities and Exchange Commission. The Company disclaims any obligation to update or revise any forward-looking statement based on the occurrence of future events, the receipt of new information, or otherwise.
Saratoga Resources, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 2008 and 2007
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2008 2007 2008 2007
Revenues:
Crude oil, condensate and natural gas liquids $ 10,626,472 $ - $ 10,626,472 $ -
Natural gas 1,924,465 16,220 1,959,574 25,000
Total revenues 12,550,937 16,220 12,586,046 25,000
Operating Expense:
Lease operating expense 3,598,214 13,625 3,602,888 16,740
Depreciation, depletion and amortization 5,194,983 88 5,194,983 263
General and administrative 1,643,854 18,599 1,962,590 32,625
Taxes other than income 1,424,576 - 1,424,576 -
Total operating expenses 11,861,627 32,312 12,185,037 49,628
Operating income (loss) 689,310 (16,092 ) 401,009 (24,628 )
Other income (expenses):
Commodity derivative income, net 12,855,560 - 12,855,560 -
Other income 526,839 - 526,839 -
Interest income 37,945 - 37,945 -
Interest expense (4,645,655 ) (13,360 ) (4,675,112 ) (37,892 )
Total other income (expense) 8,774,689 (13,360 ) 8,745,232 (37,892 )
Net income (loss) before income taxes 9,463,999 (29,452 ) 9,146,241 (62,520 )
Income tax provision:
Current 560,007 - 560,007 -
Deferred 2,679,150 - 2,679,150 -
Net income (loss) $ 6,224,842 $ (29,452 ) $ 5,907,084 $ (62,520 )
Net income (loss) per share:
Basic $ 0.41 $ (0.01 ) $ 0.48 $ (0.01 )
Diluted $ 0.36 $ (0.01 ) $ 0.45 $ (0.01 )
Weighted average number of common shares outstanding:
Basic 15,183,205 7,540,292 12,254,701 7,540,292
Diluted 17,058,426 7,540,292 13,199,147 7,540,292
TransAtlantic Petroleum Corp.: Third Quarter 2008 Financial Results and Operations Update
CALGARY, ALBERTA, Nov 14, 2008 (MARKET WIRE via COMTEX) ----TransAtlantic Petroleum Corp. (TSX: TNP) today reported the following (all results in U.S. dollars):
Consolidated net loss for the quarter ended September 30, 2008 was $1.5 million or $0.02 per share, compared to a net loss of $2.2 million or $0.05 per share for the same quarter last year. The Company's consolidated net loss for the third quarter 2008 is primarily composed of general and administrative costs of $719,000 and international expenditures of $858,000. As of September 30, 2008, the Company had cash and cash equivalents of $10.1 million, no debt and working capital of $9.4 million compared to cash and cash equivalents of $657,000, current debt of $4.0 million and working capital of $316,000 at September 30, 2007.
With regard to the development of its international properties, in October 2008 the Company began re-entry operations on one well in Morocco. In September 2008, the Company agreed to farm-in to Sterling Resources Ltd.'s Sud Craiova Block in western Romania. In exchange for a 50% working interest, the Company will drill three 1,000 meter exploration wells on the Sud Craiova license. The Company expects to commence drilling operations in Romania in December 2008. Also in September 2008, the Company agreed to farm-in to Incremental Petroleum Limited's License 4262 in southeastern Turkey. In exchange for a 60% working interest, the Company agreed to drill one exploration well. By drilling this well, the Company will also earn an undivided 75% working interest in four additional licenses covering 1,863 square kilometers (460,321 acres) in southeastern Turkey, subject to government approval. The Company began drilling operations on this well in October 2008. By the end of November 2008, drilling operations will commence to test the Bedinan Ordivician formation (approximately 3,700 meters) on Block 4174 in southeastern Turkey pursuant to a farmout agreement in which the Company retains a 25% working interest. The Company will be carried through testing of the well.
The re-entry operation in Morocco is being performed with a drilling rig supplied by Longe Energy Limited. As announced in the Company's press releases dated August 27 and September 19, 2008, the Company has agreed to acquire Longe Energy Limited in a transaction expected to close in December 2008, subject to regulatory and shareholder approval.
TransAtlantic is engaged in the exploration, development and production of crude oil and natural gas in Morocco, Turkey and Romania. Common shares of TransAtlantic are listed on the Toronto Stock Exchange under the symbol "TNP."
This news release contains statements regarding drilling, plans, plans to raise capital, and plans to acquire a company, as well as other expectations, plans, goals, objectives, assumptions or information about future events, conditions, results of operations or performance that may constitute forward-looking statements or information under applicable securities legislation. Such forward-looking statements or information are based on a number of assumptions which may prove to be incorrect. In addition to other assumptions identified in this news release, assumptions have been made regarding, among other things, the ability of the Company to continue to develop and exploit attractive foreign initiatives.
Although the Company believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because the Company can give no assurance that such expectations will prove to be correct. Forward-looking statements or information are based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by the Company and described in the forward-looking statements or information. These risks and uncertainties include but are not limited to the continuing ability of the Company to operate effectively internationally, reliance on current oil and gas laws, rules and regulations, volatility of oil and gas prices, fluctuations in currency and interest rates, imprecision of resource estimates, the results of exploration, development and drilling, imprecision in estimates of future production capacity, changes in environmental and other regulations or the interpretation of such regulations, the ability to obtain necessary regulatory approvals, weather and general economic and business conditions.
The forward-looking statements or information contained in this news release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
NO STOCK EXCHANGE, SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY HAS APPROVED OR DISAPPROVED THE INFORMATION CONTAINED HEREIN.
SOURCE: TransAtlantic Petroleum Corp.
http://www.tapcor.com Copyright 2008 Market Wire, All rights reserved.
Consolidated net loss for the quarter ended September 30, 2008 was $1.5 million or $0.02 per share, compared to a net loss of $2.2 million or $0.05 per share for the same quarter last year. The Company's consolidated net loss for the third quarter 2008 is primarily composed of general and administrative costs of $719,000 and international expenditures of $858,000. As of September 30, 2008, the Company had cash and cash equivalents of $10.1 million, no debt and working capital of $9.4 million compared to cash and cash equivalents of $657,000, current debt of $4.0 million and working capital of $316,000 at September 30, 2007.
With regard to the development of its international properties, in October 2008 the Company began re-entry operations on one well in Morocco. In September 2008, the Company agreed to farm-in to Sterling Resources Ltd.'s Sud Craiova Block in western Romania. In exchange for a 50% working interest, the Company will drill three 1,000 meter exploration wells on the Sud Craiova license. The Company expects to commence drilling operations in Romania in December 2008. Also in September 2008, the Company agreed to farm-in to Incremental Petroleum Limited's License 4262 in southeastern Turkey. In exchange for a 60% working interest, the Company agreed to drill one exploration well. By drilling this well, the Company will also earn an undivided 75% working interest in four additional licenses covering 1,863 square kilometers (460,321 acres) in southeastern Turkey, subject to government approval. The Company began drilling operations on this well in October 2008. By the end of November 2008, drilling operations will commence to test the Bedinan Ordivician formation (approximately 3,700 meters) on Block 4174 in southeastern Turkey pursuant to a farmout agreement in which the Company retains a 25% working interest. The Company will be carried through testing of the well.
The re-entry operation in Morocco is being performed with a drilling rig supplied by Longe Energy Limited. As announced in the Company's press releases dated August 27 and September 19, 2008, the Company has agreed to acquire Longe Energy Limited in a transaction expected to close in December 2008, subject to regulatory and shareholder approval.
TransAtlantic is engaged in the exploration, development and production of crude oil and natural gas in Morocco, Turkey and Romania. Common shares of TransAtlantic are listed on the Toronto Stock Exchange under the symbol "TNP."
This news release contains statements regarding drilling, plans, plans to raise capital, and plans to acquire a company, as well as other expectations, plans, goals, objectives, assumptions or information about future events, conditions, results of operations or performance that may constitute forward-looking statements or information under applicable securities legislation. Such forward-looking statements or information are based on a number of assumptions which may prove to be incorrect. In addition to other assumptions identified in this news release, assumptions have been made regarding, among other things, the ability of the Company to continue to develop and exploit attractive foreign initiatives.
Although the Company believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because the Company can give no assurance that such expectations will prove to be correct. Forward-looking statements or information are based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by the Company and described in the forward-looking statements or information. These risks and uncertainties include but are not limited to the continuing ability of the Company to operate effectively internationally, reliance on current oil and gas laws, rules and regulations, volatility of oil and gas prices, fluctuations in currency and interest rates, imprecision of resource estimates, the results of exploration, development and drilling, imprecision in estimates of future production capacity, changes in environmental and other regulations or the interpretation of such regulations, the ability to obtain necessary regulatory approvals, weather and general economic and business conditions.
The forward-looking statements or information contained in this news release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
NO STOCK EXCHANGE, SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY HAS APPROVED OR DISAPPROVED THE INFORMATION CONTAINED HEREIN.
SOURCE: TransAtlantic Petroleum Corp.
http://www.tapcor.com Copyright 2008 Market Wire, All rights reserved.
China North East Petroleum Reports Third Quarter 2008 Financial Results
HARBIN, China and NEW YORK, Nov.14 /Xinhua-PRNewswire-FirstCall/ -- China North East Petroleum Holdings Limited (the "Company") (OTC Bulletin Board: CNEH), an oil producing company in Northern China, today announced consolidated financial results for the third quarter ended September 30, 2008.
Third Quarter 2008 Results
Total sales for the third quarter were $19.1 million, a 227% increase compared to $5.8 million over the same period last year. This increase was due to an increase in crude oil production and the average price received for crude oil. Crude oil production for the third quarter doubled to 172,730 barrels from 86,222 barrels for the comparable quarter in the prior year. The increase in production was attributable to refracturing improvements and the implementation of water injection technology which improved efficiency of existing oil wells as well as from the addition of 30 new wells drilled during the third quarter of 2008.
The cost of sales in the third quarter increased by 214% to $9.2 million from $2.9 million for the three months ended September 30, 2007. The increase in cost of sales resulted primarily from the increase in production, depreciation of oil and gas properties, and an increase in the absolute amount of oil surcharges as a result of increased production.
Gross profit in the third quarter increased 241% to $9.9 million from $2.9 million in the same period last year. Third quarter gross margin increased to 52.0% compared to 49.9% in the year ago period.
Operating expenses increased to $978 thousand, or 5.1% of sales, from $291 thousand, or 5.0% of sales, in the third quarter 2007. This is primarily a result of an increase in selling, general and administrative costs. Operating income increased 241% to $8.9 million, or 46.8% of total sales, compared to $2.6 million, or 44.9% of total sales, in the prior year period.
Net income for the third quarter increased 229% to $4.9 million, or $0.24 per diluted share, versus $1.5 million, or $0.08 per diluted share, in the third quarter of 2007.
Mr. Hongjun Wang, President of China North East Petroleum commented, "We were pleased to report another strong quarter of revenue and profit growth and are on plan to report record production increases in 2008. We added 30 new wells during the third quarter bringing our total oil well count to 218 wells through September. Most of these wells have been installed in the Qian'an 112 oilfield where the majority of our wells are located.
During the quarter, we were particularly satisfied to see significant improvements to our financial liquidity. We grew our cash position by 220% sequentially to nearly $8 million and our operating cash flow improved notably as well. Based on the reserves within our four existing oilfields (Qian'an 112, Hetingbao 301, Daan 34, Gudian 31), we believe we have the capability of drilling approximately 675 wells in the coming years and believe the cash flows derived from oil we yield from our existing wells can support much of our well expansion activities in these areas.
Heading into the fourth quarter, we expect to be impacted by lower per- barrel oil prices which will likely impact revenue growth but believe we can sustain our full year net profit projection of $14.5-$15 million and diluted EPS of $0.62-$0.65 due to our strong production rates in the second half of the year as well as from a lower government oil surcharge rate. As oil prices decline, the amount of oil surcharge we are required to pay to the Chinese government declines. During this difficult market environment, we are keeping our operating costs low and continue to implement strict cost controls in all key areas of operation. We are encouraged with our opportunity in the market and continue to focus on expanding our position in China's oil market by adding more wells to our production capacity and seeking additional oil fields to lease and operate. We continue to expect very healthy quarterly revenue, EBITDA and profit growth, even at current oil price levels, and believe the growth plan we have in place will yield strong financial results ahead," concluded Wang.
Nine Month 2008 Results
Sales for the nine month period ended September 30, 2008 increased 273% to $44.1 million compared to $11.8 million for the nine month prior year period. Crude oil production through the first nine months of 2008 increased 143% to 422,788 barrels from 174,280 barrels for the comparable period in the prior year.
Gross profit for the first nine months was $23.6 million, a 292% increase over $6.0 million in the same period last year. Gross margin increased 260 basis points to 53.6% compared to 51.0% in the year ago period.
Operating expenses through the first nine months of 2008 were $2.0 million, or 4.4% of sales, compared to $939 thousand, or 8.0% of sales, in the prior year period. Operating income increased 326% to $21.7 million, or 49.2% of sales, compared to $5.1 million, or 43.1% of sales, in the prior year nine month period.
Net income increased by 223% to $9.8 million, or $0.54 per diluted share, from $3.0 million, or $0.12 per diluted share, for the nine months ended September 30, 2007.
2008 Financial Outlook
The Company expects 2008 crude oil production to total approximately 623,000 barrels and the anticipated number of oil producing wells is expected to total approximately 240 wells by year-end 2008. This is a 133% increase from 267,516 barrels produced in 2007, when the company finished the year with 157 wells.
Based on the Company's results through the first nine months of 2008, its drilling schedule for the remainder of 2008, and the current per-barrel price of oil received from PTR, the Company reiterates comfort with 2008 net income growth of 190%-200% to $14.5-$15.0 million, and fully diluted earnings per share growth of 195%-200% to $0.62-$0.65, compared to the 2007 fiscal year. The fully diluted EPS estimate range is based on a share count of approximately 24.0 million shares and assumes the exercise of all outstanding Company warrants.
Oil Pricing
Please note that CNEH's sole customer, PTR pays the Company a price per barrel which is calculated on a monthly basis, and is based upon a lagged, daily price per barrel average for a relatively heavy, sour grade of crude oil that trades in Singapore. This daily price index is one of a large number of crude oil price indices maintained by Platts, an international commodity and trading company. The grade of oil for which the company is paid typically trades at a discount to West Texas or London Brent crude.
Government Oil Surcharge
Under a regulation introduced in June 2006 by the Chinese government, a surcharge of 20% has been imposed on Chinese oil producers on the portion of the selling price of crude oil which exceeds $40 per barrel and a surcharge of 40% is imposed on the portion of the selling price of crude oil which exceeds $60 per barrel.
ABOUT CHINA NORTH EAST PETROLEUM
China North East Petroleum Holdings Ltd. is engaged in the production of crude oil in Northern China. The Company has a guaranteed arrangement with the Jilin Refinery of PetroChina to sell its produced crude oil for use in the China marketplace. The Company currently operates four oilfields in Northern China.
Statements in this press release which are not historical data are forward-looking statements which involve known and unknown risks, uncertainties or other factors not under the company's control, which may cause actual results, performance or achievements of the company to be materially different from the results, performance or other expectations implied by these forward-looking statements. These factors include, but are not limited to, those detailed in the company's periodic filings with the Securities and Exchange Commission.
(Financial tables on following pages)
CHINA NORTH EAST PETROLEUM HOLDINGS LIMITED AND SUBSIDIARIES
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited) (Unaudited)
Three months ended Nine months ended
September 30 September 30
2008 2007 2008 2007
$ 19,060,007 $ 5,826,506 $44,051,519 $ 11,804,007
NET SALES
COST OF SALES
Production costs 895,155 704,568 2,390,432 1,669,166
Depreciation of
Oil and gas
properties 3,774,327 1,361,732 8,155,321 2,601,561
Amortization of
intangible assets 2,975 2,695 8,743 7,972
Government oil
surcharge 4,480,955 848,315 9,865,655 1,500,902
Total Cost
of Sales 9,153,412 2,917,310 20,420,151 5,779,601
GROSS PROFIT 9,906,595 2,909,196 23,631,368 6,024,406
OPERATING EXPENSES
Selling, general
and administrative
expenses 793,479 194,697 1,339,404 694,103
Professional fees 42,850 26,245 140,180 46,245
Consulting fees 91,926 27,125 319,764 81,375
Depreciation of
fixed assets 50,445 42,609 160,930 117,593
Total
Operating
Expenses 978,700 290,676 1,960,278 939,316
INCOME FROM
OPERATIONS 8,927,895 2,618,520 21,671,090 5,085,090
OTHER INCOME
(EXPENSE)
Other income 809 -- 66,651 --
Other expense (2,000) (3,878) (107,601) (3,878)
Interest expense (296,761) (28,186) (721,805) (51,290)
Amortization of
deferred financing
costs (74,140) -- (172,992) --
Amortization of
discount on
debenture (486,803) -- (1,135,874) --
Imputed interest
expense (16,794) (6,404) (49,535) (139,079)
Interest income 4,238 615 34,204 1,105
Gain on disposal
of fixed assets -- 460 -- 15,217
Recovery of deposit
from a supplier
previously written
off -- 2,515 -- 358,609
Total Other
Income
(Expense),
net (871,451) (34,878) (2,086,952) 180,684
NET INCOME BEFORE TAXES
AND MINORITY INTERESTS 8,056,444 2,583,642 19,584,138 5,265,774
Income tax expense (2,390,961) (885,188) (5,695,498) (1,825,513)
Minority interests (726,566) (198,959) (1,889,457) (399,836)
NET INCOME 4,938,917 1,499,495 11,999,183 3,040,425
OTHER COMPREHENSIVE
INCOME
Foreign currency
translation gain 152,651 235,873 2,020,632 450,633
COMPREHENSIVE INCOME $ 5,091,568 $ 1,735,368 $14,019,815 $ 3,491,058
Net income per share
- basic $ 0.25 $ 0.08 $ 0.62 $ 0.12
- diluted $ 0.24 $ 0.08 $ 0.61 $ 0.12
Weighted average number of shares
outstanding during the period
- basic 19,987,123 19,224,080 19,480,284 25,780,857
- diluted 20,676,711 19,224,080 19,624,216 25,780,857
CHINA NORTH EAST PETROLEUM HOLDINGS LIMITED AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
September December
30, 2008 31, 2007
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 7,762,017 $ 74,638
Accounts receivable, net 10,595,234 4,852,633
Prepaid expenses and other
current assets 2,261,853 398,046
Current portion of deferred
financing costs, net 296,557 --
Value added tax recoverable -- 651,905
Total Current Assets 20,915,661 5,977,222
PROPERTY AND EQUIPMENT
Oil and gas properties, net 56,007,998 40,345,008
Fixed assets, net 1,462,703 885,474
Oil and gas properties under
construction 784,851 2,550,058
Total Property and Equipment 58,255,552 43,780,540
LAND USE RIGHTS, NET 39,168 45,076
LONG-TERM DEFERRED FINANCING
COSTS, NET 716,680 --
DEFERRED TAX ASSETS 209,102 --
TOTAL ASSETS $ 80,136,163 $ 49,802,838
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 10,806,009 $ 6,580,930
Current portion of secured
debenture, net of discount 1,399,451 --
Other payables and accrued
liabilities 825,947 1,020,980
Due to related parties 14,588 28,036
Note payable -- 273,444
Income tax and other taxes
payable 7,605,514 2,687,449
Due to a stockholder 783,258 123,105
Total Current Liabilities 21,434,767 10,713,944
LONG-TERM LIABILITIES
Accounts payable 7,783,956 15,467,661
Secured debenture, net of
discount 6,197,571 --
Deferred tax payable -- 543,100
Due to a related party 486,714 3,118,085
Total Long-term Liabilities 14,468,241 19,128,846
TOTAL LIABILITIES 35,903,008 29,842,790
COMMITMENTS AND CONTINGENCIES -- --
MINORITY INTERESTS 3,014,421 1,124,964
STOCKHOLDERS' EQUITY
Common stock ($0.001 par value, 150,000,000
shares authorized, 20,784,080 shares issued
and outstanding as of September 30, 2008;
19,224,080 shares issued and outstanding as
of December 31, 2007) 20,784 19,224
Additional paid-in capital 21,147,979 11,361,579
Deferred stock compensation (1,451,250) (27,125)
Retained earnings
Unappropriated 17,200,090 5,200,907
Appropriated 916,263 916,263
Accumulated other comprehensive
income 3,384,868 1,364,236
Total Stockholders' Equity 41,218,734 18,835,084
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 80,136,163 $ 49,802,838
CHINA NORTH EAST PETROLEUM HOLDINGS LIMITED AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the nine months ended September 30, 2008 and 2007 (Unaudited)
2008 2007
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $ 11,999,183 $ 3,040,425
Adjusted to reconcile
net income to cash
provided by operating
activities:
Depreciation of oil
and gas properties 8,155,321 2,601,561
Depreciation of fixed
assets 160,930 117,593
Amortization of land
use rights 8,743 7,972
Amortization of
deferred financing
costs 172,992 --
Amortization of
discount on debenture 1,135,874 --
Amortization of stock
option compensation 163,402 --
Warrants issued for
services 154,171 --
Minority interests 1,889,457 399,836
Stocks issued for
services 27,125 81,375
Stocks-based
compensation for
service 168,750 --
Imputed interest
expenses 49,535 139,079
Gain on disposal of
fixed assets -- (15,217)
Changes in operating
assets and liabilities
(Increase) decrease in:
Accounts receivable (5,742,601) (2,026,688)
Prepaid expenses and
other current assets (1,863,807) (262,501)
Due from related
parties -- 38,692
Value added tax
recoverable 651,905 (1,200,623)
Deferred financing
costs (1,186,229) --
Deferred tax assets (209,102) --
Increase (decrease)
in:
Accounts payable (3,458,626) 3,781,456
Other payables and
accrued liabilities (195,033) (2,824)
Income tax and other
taxes payable 4,918,065 2,123,234
Deferred tax payable (543,100) 363,774
Net cash provided by
operating activities 16,456,955 9,187,144
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of oil and
gas properties (18,300,636) (8,992,444)
Purchase of fixed
assets (668,233) (321,211)
Additions to oil and
gas properties under
construction (649,786) (714,885)
Proceeds on disposal
of fixed assets -- 23,451
Net cash used in
investing activities (19,618,655) (10,005,089)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from the
issuances of notes
payable -- 798,128
Repayment of note
payable -- (133,021)
Proceeds from
issuance of secured
debenture 15,000,000 --
Repayment of secured
debenture (750,000) --
Decrease in other
loans payable -- (25,612)
Proceeds from
exercise of stock
warrants 12,000 --
Increase in due to a
stockholder 660,153 146,813
(Decrease) increase
in due to related
parties (2,644,819) 1,280,048
Net cash provided by
financing activities 12,277,334 2,066,356
EFFECT OF EXCHANGE RATE ON
CASH (1,428,255) (950,576)
NET INCREASE IN CASH AND
CASH EQUIVALENTS 7,687,379 297,835
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 74,638 13,746
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 7,762,017 $ 311,581
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the period
for:
Income tax expense $ 4,932,518 $ 208,315
Interest expense $ 721,805 $ 51,290
SUPPLEMENTAL DISCLOSURE OF NON-CASH OPERATING ACTIVITIES:
During 2008, the Company issued 360,000 shares of common stock valued at $1,620,000 as employee stock bonuses.
SOURCE China North East Petroleum Holdings Ltd.
Third Quarter 2008 Results
Total sales for the third quarter were $19.1 million, a 227% increase compared to $5.8 million over the same period last year. This increase was due to an increase in crude oil production and the average price received for crude oil. Crude oil production for the third quarter doubled to 172,730 barrels from 86,222 barrels for the comparable quarter in the prior year. The increase in production was attributable to refracturing improvements and the implementation of water injection technology which improved efficiency of existing oil wells as well as from the addition of 30 new wells drilled during the third quarter of 2008.
The cost of sales in the third quarter increased by 214% to $9.2 million from $2.9 million for the three months ended September 30, 2007. The increase in cost of sales resulted primarily from the increase in production, depreciation of oil and gas properties, and an increase in the absolute amount of oil surcharges as a result of increased production.
Gross profit in the third quarter increased 241% to $9.9 million from $2.9 million in the same period last year. Third quarter gross margin increased to 52.0% compared to 49.9% in the year ago period.
Operating expenses increased to $978 thousand, or 5.1% of sales, from $291 thousand, or 5.0% of sales, in the third quarter 2007. This is primarily a result of an increase in selling, general and administrative costs. Operating income increased 241% to $8.9 million, or 46.8% of total sales, compared to $2.6 million, or 44.9% of total sales, in the prior year period.
Net income for the third quarter increased 229% to $4.9 million, or $0.24 per diluted share, versus $1.5 million, or $0.08 per diluted share, in the third quarter of 2007.
Mr. Hongjun Wang, President of China North East Petroleum commented, "We were pleased to report another strong quarter of revenue and profit growth and are on plan to report record production increases in 2008. We added 30 new wells during the third quarter bringing our total oil well count to 218 wells through September. Most of these wells have been installed in the Qian'an 112 oilfield where the majority of our wells are located.
During the quarter, we were particularly satisfied to see significant improvements to our financial liquidity. We grew our cash position by 220% sequentially to nearly $8 million and our operating cash flow improved notably as well. Based on the reserves within our four existing oilfields (Qian'an 112, Hetingbao 301, Daan 34, Gudian 31), we believe we have the capability of drilling approximately 675 wells in the coming years and believe the cash flows derived from oil we yield from our existing wells can support much of our well expansion activities in these areas.
Heading into the fourth quarter, we expect to be impacted by lower per- barrel oil prices which will likely impact revenue growth but believe we can sustain our full year net profit projection of $14.5-$15 million and diluted EPS of $0.62-$0.65 due to our strong production rates in the second half of the year as well as from a lower government oil surcharge rate. As oil prices decline, the amount of oil surcharge we are required to pay to the Chinese government declines. During this difficult market environment, we are keeping our operating costs low and continue to implement strict cost controls in all key areas of operation. We are encouraged with our opportunity in the market and continue to focus on expanding our position in China's oil market by adding more wells to our production capacity and seeking additional oil fields to lease and operate. We continue to expect very healthy quarterly revenue, EBITDA and profit growth, even at current oil price levels, and believe the growth plan we have in place will yield strong financial results ahead," concluded Wang.
Nine Month 2008 Results
Sales for the nine month period ended September 30, 2008 increased 273% to $44.1 million compared to $11.8 million for the nine month prior year period. Crude oil production through the first nine months of 2008 increased 143% to 422,788 barrels from 174,280 barrels for the comparable period in the prior year.
Gross profit for the first nine months was $23.6 million, a 292% increase over $6.0 million in the same period last year. Gross margin increased 260 basis points to 53.6% compared to 51.0% in the year ago period.
Operating expenses through the first nine months of 2008 were $2.0 million, or 4.4% of sales, compared to $939 thousand, or 8.0% of sales, in the prior year period. Operating income increased 326% to $21.7 million, or 49.2% of sales, compared to $5.1 million, or 43.1% of sales, in the prior year nine month period.
Net income increased by 223% to $9.8 million, or $0.54 per diluted share, from $3.0 million, or $0.12 per diluted share, for the nine months ended September 30, 2007.
2008 Financial Outlook
The Company expects 2008 crude oil production to total approximately 623,000 barrels and the anticipated number of oil producing wells is expected to total approximately 240 wells by year-end 2008. This is a 133% increase from 267,516 barrels produced in 2007, when the company finished the year with 157 wells.
Based on the Company's results through the first nine months of 2008, its drilling schedule for the remainder of 2008, and the current per-barrel price of oil received from PTR, the Company reiterates comfort with 2008 net income growth of 190%-200% to $14.5-$15.0 million, and fully diluted earnings per share growth of 195%-200% to $0.62-$0.65, compared to the 2007 fiscal year. The fully diluted EPS estimate range is based on a share count of approximately 24.0 million shares and assumes the exercise of all outstanding Company warrants.
Oil Pricing
Please note that CNEH's sole customer, PTR pays the Company a price per barrel which is calculated on a monthly basis, and is based upon a lagged, daily price per barrel average for a relatively heavy, sour grade of crude oil that trades in Singapore. This daily price index is one of a large number of crude oil price indices maintained by Platts, an international commodity and trading company. The grade of oil for which the company is paid typically trades at a discount to West Texas or London Brent crude.
Government Oil Surcharge
Under a regulation introduced in June 2006 by the Chinese government, a surcharge of 20% has been imposed on Chinese oil producers on the portion of the selling price of crude oil which exceeds $40 per barrel and a surcharge of 40% is imposed on the portion of the selling price of crude oil which exceeds $60 per barrel.
ABOUT CHINA NORTH EAST PETROLEUM
China North East Petroleum Holdings Ltd. is engaged in the production of crude oil in Northern China. The Company has a guaranteed arrangement with the Jilin Refinery of PetroChina to sell its produced crude oil for use in the China marketplace. The Company currently operates four oilfields in Northern China.
Statements in this press release which are not historical data are forward-looking statements which involve known and unknown risks, uncertainties or other factors not under the company's control, which may cause actual results, performance or achievements of the company to be materially different from the results, performance or other expectations implied by these forward-looking statements. These factors include, but are not limited to, those detailed in the company's periodic filings with the Securities and Exchange Commission.
(Financial tables on following pages)
CHINA NORTH EAST PETROLEUM HOLDINGS LIMITED AND SUBSIDIARIES
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited) (Unaudited)
Three months ended Nine months ended
September 30 September 30
2008 2007 2008 2007
$ 19,060,007 $ 5,826,506 $44,051,519 $ 11,804,007
NET SALES
COST OF SALES
Production costs 895,155 704,568 2,390,432 1,669,166
Depreciation of
Oil and gas
properties 3,774,327 1,361,732 8,155,321 2,601,561
Amortization of
intangible assets 2,975 2,695 8,743 7,972
Government oil
surcharge 4,480,955 848,315 9,865,655 1,500,902
Total Cost
of Sales 9,153,412 2,917,310 20,420,151 5,779,601
GROSS PROFIT 9,906,595 2,909,196 23,631,368 6,024,406
OPERATING EXPENSES
Selling, general
and administrative
expenses 793,479 194,697 1,339,404 694,103
Professional fees 42,850 26,245 140,180 46,245
Consulting fees 91,926 27,125 319,764 81,375
Depreciation of
fixed assets 50,445 42,609 160,930 117,593
Total
Operating
Expenses 978,700 290,676 1,960,278 939,316
INCOME FROM
OPERATIONS 8,927,895 2,618,520 21,671,090 5,085,090
OTHER INCOME
(EXPENSE)
Other income 809 -- 66,651 --
Other expense (2,000) (3,878) (107,601) (3,878)
Interest expense (296,761) (28,186) (721,805) (51,290)
Amortization of
deferred financing
costs (74,140) -- (172,992) --
Amortization of
discount on
debenture (486,803) -- (1,135,874) --
Imputed interest
expense (16,794) (6,404) (49,535) (139,079)
Interest income 4,238 615 34,204 1,105
Gain on disposal
of fixed assets -- 460 -- 15,217
Recovery of deposit
from a supplier
previously written
off -- 2,515 -- 358,609
Total Other
Income
(Expense),
net (871,451) (34,878) (2,086,952) 180,684
NET INCOME BEFORE TAXES
AND MINORITY INTERESTS 8,056,444 2,583,642 19,584,138 5,265,774
Income tax expense (2,390,961) (885,188) (5,695,498) (1,825,513)
Minority interests (726,566) (198,959) (1,889,457) (399,836)
NET INCOME 4,938,917 1,499,495 11,999,183 3,040,425
OTHER COMPREHENSIVE
INCOME
Foreign currency
translation gain 152,651 235,873 2,020,632 450,633
COMPREHENSIVE INCOME $ 5,091,568 $ 1,735,368 $14,019,815 $ 3,491,058
Net income per share
- basic $ 0.25 $ 0.08 $ 0.62 $ 0.12
- diluted $ 0.24 $ 0.08 $ 0.61 $ 0.12
Weighted average number of shares
outstanding during the period
- basic 19,987,123 19,224,080 19,480,284 25,780,857
- diluted 20,676,711 19,224,080 19,624,216 25,780,857
CHINA NORTH EAST PETROLEUM HOLDINGS LIMITED AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
September December
30, 2008 31, 2007
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 7,762,017 $ 74,638
Accounts receivable, net 10,595,234 4,852,633
Prepaid expenses and other
current assets 2,261,853 398,046
Current portion of deferred
financing costs, net 296,557 --
Value added tax recoverable -- 651,905
Total Current Assets 20,915,661 5,977,222
PROPERTY AND EQUIPMENT
Oil and gas properties, net 56,007,998 40,345,008
Fixed assets, net 1,462,703 885,474
Oil and gas properties under
construction 784,851 2,550,058
Total Property and Equipment 58,255,552 43,780,540
LAND USE RIGHTS, NET 39,168 45,076
LONG-TERM DEFERRED FINANCING
COSTS, NET 716,680 --
DEFERRED TAX ASSETS 209,102 --
TOTAL ASSETS $ 80,136,163 $ 49,802,838
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 10,806,009 $ 6,580,930
Current portion of secured
debenture, net of discount 1,399,451 --
Other payables and accrued
liabilities 825,947 1,020,980
Due to related parties 14,588 28,036
Note payable -- 273,444
Income tax and other taxes
payable 7,605,514 2,687,449
Due to a stockholder 783,258 123,105
Total Current Liabilities 21,434,767 10,713,944
LONG-TERM LIABILITIES
Accounts payable 7,783,956 15,467,661
Secured debenture, net of
discount 6,197,571 --
Deferred tax payable -- 543,100
Due to a related party 486,714 3,118,085
Total Long-term Liabilities 14,468,241 19,128,846
TOTAL LIABILITIES 35,903,008 29,842,790
COMMITMENTS AND CONTINGENCIES -- --
MINORITY INTERESTS 3,014,421 1,124,964
STOCKHOLDERS' EQUITY
Common stock ($0.001 par value, 150,000,000
shares authorized, 20,784,080 shares issued
and outstanding as of September 30, 2008;
19,224,080 shares issued and outstanding as
of December 31, 2007) 20,784 19,224
Additional paid-in capital 21,147,979 11,361,579
Deferred stock compensation (1,451,250) (27,125)
Retained earnings
Unappropriated 17,200,090 5,200,907
Appropriated 916,263 916,263
Accumulated other comprehensive
income 3,384,868 1,364,236
Total Stockholders' Equity 41,218,734 18,835,084
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 80,136,163 $ 49,802,838
CHINA NORTH EAST PETROLEUM HOLDINGS LIMITED AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the nine months ended September 30, 2008 and 2007 (Unaudited)
2008 2007
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $ 11,999,183 $ 3,040,425
Adjusted to reconcile
net income to cash
provided by operating
activities:
Depreciation of oil
and gas properties 8,155,321 2,601,561
Depreciation of fixed
assets 160,930 117,593
Amortization of land
use rights 8,743 7,972
Amortization of
deferred financing
costs 172,992 --
Amortization of
discount on debenture 1,135,874 --
Amortization of stock
option compensation 163,402 --
Warrants issued for
services 154,171 --
Minority interests 1,889,457 399,836
Stocks issued for
services 27,125 81,375
Stocks-based
compensation for
service 168,750 --
Imputed interest
expenses 49,535 139,079
Gain on disposal of
fixed assets -- (15,217)
Changes in operating
assets and liabilities
(Increase) decrease in:
Accounts receivable (5,742,601) (2,026,688)
Prepaid expenses and
other current assets (1,863,807) (262,501)
Due from related
parties -- 38,692
Value added tax
recoverable 651,905 (1,200,623)
Deferred financing
costs (1,186,229) --
Deferred tax assets (209,102) --
Increase (decrease)
in:
Accounts payable (3,458,626) 3,781,456
Other payables and
accrued liabilities (195,033) (2,824)
Income tax and other
taxes payable 4,918,065 2,123,234
Deferred tax payable (543,100) 363,774
Net cash provided by
operating activities 16,456,955 9,187,144
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of oil and
gas properties (18,300,636) (8,992,444)
Purchase of fixed
assets (668,233) (321,211)
Additions to oil and
gas properties under
construction (649,786) (714,885)
Proceeds on disposal
of fixed assets -- 23,451
Net cash used in
investing activities (19,618,655) (10,005,089)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from the
issuances of notes
payable -- 798,128
Repayment of note
payable -- (133,021)
Proceeds from
issuance of secured
debenture 15,000,000 --
Repayment of secured
debenture (750,000) --
Decrease in other
loans payable -- (25,612)
Proceeds from
exercise of stock
warrants 12,000 --
Increase in due to a
stockholder 660,153 146,813
(Decrease) increase
in due to related
parties (2,644,819) 1,280,048
Net cash provided by
financing activities 12,277,334 2,066,356
EFFECT OF EXCHANGE RATE ON
CASH (1,428,255) (950,576)
NET INCREASE IN CASH AND
CASH EQUIVALENTS 7,687,379 297,835
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 74,638 13,746
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 7,762,017 $ 311,581
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the period
for:
Income tax expense $ 4,932,518 $ 208,315
Interest expense $ 721,805 $ 51,290
SUPPLEMENTAL DISCLOSURE OF NON-CASH OPERATING ACTIVITIES:
During 2008, the Company issued 360,000 shares of common stock valued at $1,620,000 as employee stock bonuses.
SOURCE China North East Petroleum Holdings Ltd.
Infinity Announces Third Quarter and Nine-Month Operating Results
DENVER, Nov. 11 /PRNewswire-FirstCall/ -- Infinity Energy Resources, Inc. (Pink Sheets: IFNY) ("Infinity" or "the Company"), an independent oil and gas exploration and development company, today reported its operating results for the third quarter and first nine months of 2008. The Company has scheduled an investor conference call for 11:00 a.m. EST tomorrow, November 12, 2008 (see details below) to discuss these operating results and other subjects of interest.
Operating Results for Third Quarter and Nine-Month Period
On November 10, 2008, the Company filed its Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2008. It is recommended that interested parties consult the Form 10-Q, along with the Annual Report on Form 10-K for the year ended December 31, 2007, for additional information on the Company and its financial condition. A brief summary of operating results for the respective periods ended September 30, 2008 is provided below.
Revenues for the three months ended September 30, 2008 totaled $1,062,000, compared with $2,460,000 in the third quarter of 2007. The $1.4 million, or 57%, decrease in revenue consisted of an approximate $1.7 million decrease attributable to lower oil and gas production (principally the result of production in 2007 from properties subsequently sold to Forest Oil in January 2008), partially offset by a $0.3 million increase in average prices. The Company reported an operating loss of ($4,101,000) in the most recent quarter, versus an operating loss of ($1,074,000) in the prior-year quarter. The operating loss for the quarter ended September 30, 2008 included a non-cash ceiling write-down of oil and gas properties of $3,500,000. No such ceiling write-down was recorded in the quarter ended September 30, 2007. A net loss of ($4,640,000), or ($0.26) per share, was posted for the third quarter of 2008, compared with net income of $3,223,000, or $0.18 per diluted share, in the prior-year period. Net income in the quarter ended September 30, 2008 included a negative change in derivative value of ($173,000), whereas the quarter ended September 30, 2007 benefitted from a positive change in derivative fair value of $4,842,000.
Revenues for the nine months ended September 30, 2008 totaled $3,548,000, compared with $7,092,000 in the first nine months of 2007. The $3.5 million, or 50%, decrease in revenue consisted of an approximate $4.7 million decrease attributable to lower oil and gas production (principally the result of production in 2007 from properties sold to Forest Oil in January 2008), partially offset by a $1.1 million increase in average prices. The Company reported an operating loss of ($5,471,000) in the most recent nine-month period, versus an operating loss of ($20,534,000) in the prior-year period. The operating loss for the nine months ended September 30, 2008 included a non-cash ceiling write-down of oil and gas properties of $3,500,000, compared with a non-cash ceiling write-down of oil and gas properties totaling $15,750,000 in the nine months ended September 30, 2007. A net loss of ($6,717,000), or ($0.38) per share, was recorded in the first nine months of 2008, compared with a net loss of ($16,616,000), or ($0.93) per share, in the corresponding period of the previous year. The net loss in the nine months ended September 30, 2008 included a negative change in derivative fair value of ($207,000), compared with a negative change in derivative value of ($4,491,000) was recorded in the quarter ended September 30, 2007.
Operating Results for Third Quarter and Nine-Month Period
On November 10, 2008, the Company filed its Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2008. It is recommended that interested parties consult the Form 10-Q, along with the Annual Report on Form 10-K for the year ended December 31, 2007, for additional information on the Company and its financial condition. A brief summary of operating results for the respective periods ended September 30, 2008 is provided below.
Revenues for the three months ended September 30, 2008 totaled $1,062,000, compared with $2,460,000 in the third quarter of 2007. The $1.4 million, or 57%, decrease in revenue consisted of an approximate $1.7 million decrease attributable to lower oil and gas production (principally the result of production in 2007 from properties subsequently sold to Forest Oil in January 2008), partially offset by a $0.3 million increase in average prices. The Company reported an operating loss of ($4,101,000) in the most recent quarter, versus an operating loss of ($1,074,000) in the prior-year quarter. The operating loss for the quarter ended September 30, 2008 included a non-cash ceiling write-down of oil and gas properties of $3,500,000. No such ceiling write-down was recorded in the quarter ended September 30, 2007. A net loss of ($4,640,000), or ($0.26) per share, was posted for the third quarter of 2008, compared with net income of $3,223,000, or $0.18 per diluted share, in the prior-year period. Net income in the quarter ended September 30, 2008 included a negative change in derivative value of ($173,000), whereas the quarter ended September 30, 2007 benefitted from a positive change in derivative fair value of $4,842,000.
Revenues for the nine months ended September 30, 2008 totaled $3,548,000, compared with $7,092,000 in the first nine months of 2007. The $3.5 million, or 50%, decrease in revenue consisted of an approximate $4.7 million decrease attributable to lower oil and gas production (principally the result of production in 2007 from properties sold to Forest Oil in January 2008), partially offset by a $1.1 million increase in average prices. The Company reported an operating loss of ($5,471,000) in the most recent nine-month period, versus an operating loss of ($20,534,000) in the prior-year period. The operating loss for the nine months ended September 30, 2008 included a non-cash ceiling write-down of oil and gas properties of $3,500,000, compared with a non-cash ceiling write-down of oil and gas properties totaling $15,750,000 in the nine months ended September 30, 2007. A net loss of ($6,717,000), or ($0.38) per share, was recorded in the first nine months of 2008, compared with a net loss of ($16,616,000), or ($0.93) per share, in the corresponding period of the previous year. The net loss in the nine months ended September 30, 2008 included a negative change in derivative fair value of ($207,000), compared with a negative change in derivative value of ($4,491,000) was recorded in the quarter ended September 30, 2007.
Forbes Energy Services Reports Record Third Quarter 2008 Results
ALICE, Texas, Nov. 14 /PRNewswire-FirstCall/ -- Forbes Energy Services Ltd. (TSX: FRB) today announced its financial and operating results for the third quarter ended September 30, 2008. Following are highlights for the quarter:
-- Revenues increased to $105.1 million for the third quarter of 2008 from $88.6 million during the second quarter of 2008;
-- EBITDA increased to $28.9 million for the third quarter of 2008 from $25.8 million for the second quarter of 2008;
-- Well servicing rig count increased to 169 as of September 30, 2008 from 149 at June 30, 2008. Six of these rigs were being "rigged up" at September 30, 2008.
-- Fluid transport heavy truck fleet increased to 362 as of September 30, 2008 from 328 at June 30, 2008.
EBITDA is defined as net income before interest, taxes, depreciation and amortization. For a reconciliation of EBITDA to net income, please see the disclosures at the end of this release.
Net income for the three months ended September 30, 2008 was $8.3 million or $0.15 per diluted share. Net loss for the nine months ended September 30, 2008 was $19.9 million, or $0.49 loss per share, which includes a one-time, non-cash $46.4 million charge for deferred income taxes related to the Company's reorganization into a taxable entity that occurred simultaneous with its IPO on May 29, 2008.
John Crisp, Forbes Energy's President and Chief Executive Officer, stated, "We delivered strong results this quarter despite several days of hurricane- related downtime in September. Our utilization remains strong although we do anticipate at least a moderate slowdown in activity during the coming months due to lower commodity prices and a slowing economy. As a result, we have scaled back our capital expenditure budget for the rest of 2008 and 2009. Our capital expenditure plans are very flexible, and will continue to evolve with ever-changing market conditions."
Business Segment Results
Well Servicing
Well servicing revenues increased to $54.3 million during the third quarter of 2008 compared to $47.4 million in the second quarter of 2008. Well servicing segment gross margins in the third quarter of 2008 were $18.9 million, compared to $17.4 million in the second quarter of 2008.
Forbes recorded approximately 107,520 rig hours for the third quarter of 2008, compared to 97,860 in the second quarter of 2008. The Company has increased its well service fleet to 169 rigs at September 30, 2008 from 149 as of June 30, 2008, an increase of 20 rigs during the quarter. Six of these rigs were being "rigged up" as of September 30, 2008 and therefore did not contribute to operating results for the third quarter. Equipment additions for the well servicing segment totaled $28.2 million during the three months ended September 30, 2008.
Fluid Logistics
Fluid logistics revenues in the third quarter of 2008 increased to $50.8 million compared to $41.2 million in the second quarter of 2008. The increase was primarily the result of additional equipment and an expanded customer base. Gross margins for the fluid logistics segment totaled $14.5 million compared to $13.1 million in the previous quarter.
Forbes recorded 313,750 truck hours during the third quarter of 2008 compared to 271,968 for the second quarter of 2008. The Company increased its fluid transport segment heavy truck fleet to 362 as of September 30, 2008 as compared to 328 as of June 30, 2008. Total equipment additions for the fluid logistics segment were $16.0 million for the three months ended September 30, 2008.
Conference Call
Forbes Energy will host a conference call to discuss its third quarter 2008 results on Friday, November 14, 2008, at 9:00 a.m. Eastern Time (8:00 a.m. Central). To access the call, please dial (303) 275-2170 and ask for the "Forbes Energy Services" call at least 10 minutes prior to the start time. The conference call will also be broadcast live via the Internet and can be accessed through the "Corporate" page of Forbes Energy's website, www.forbesenergyservices.com.
A telephonic replay of the conference call will be available until November 21, 2008 and may be accessed by calling (303) 590-3000 and using the pass code 11121428#. A webcast archive will be available at www.forbesenergyservices.com shortly after the call and will be accessible for approximately 30 days. For more information, please contact Donna Washburn at DRG&E at (713) 529-6600 or email at dmw@drg-e.com.
About Forbes Energy
Forbes Energy Services Ltd. is an independent oilfield services contractor that provides a broad range of drilling-related and production-related services to oil and natural gas companies, primarily onshore in Texas, Mississippi, and Mexico.
Forward-Looking Statements and Regulation G Reconciliation
This press release contains "forward-looking statements," as contemplated by the Private Securities Litigation Reform Act of 1995, in which the Company discusses factors it believes may affect its performance in the future. The accuracy of the Company's assumptions, expectations, beliefs and projections depend on events or conditions that change over time and are thus susceptible to change based on actual experience, new developments and known and unknown risks. The Company gives no assurance that the forward-looking statements will prove to be correct and does not undertake any duty to update them. The Company's actual future results might differ from the forward-looking statements made in this press release for a variety of reasons, which include: supply and demand for oilfield services and industry activity levels; potential for excess capacity; competition; and substantial capital requirements. Should one or more of the foregoing risks or uncertainties materialize, or should the Company's underlying assumptions prove incorrect, the Company's actual results may vary materially from those anticipated in its forward-looking statements, and the Company's business, financial condition and results of operations could be materially and adversely affected. Additional factors that you should consider are set forth in detail in the Risk Factors section of the Company's most recent quarterly report on Form 10- Q as well as other filings the Company has made with the Securities and Exchange Commission.
Forbes Energy's financial statements and management's discussion and analysis of financial condition and results of operations can be found in the Company's quarterly report on form 10-Q, which will be filed with the Securities and Exchange Commission and posted on the Company's website.
This press release also contains references to the non-GAAP financial measure of earnings, or net income, before interest, income taxes, depreciation and amortization, or EBITDA. For a reconciliation of EBITDA to net income, please see the table at the end of this release. Management's opinion regarding the usefulness of EBITDA to investors and a description of the ways in which management uses such measures can be found on the "Corporate" page of Forbes Energy's website, www.forbesenergyservices.com.
-Tables to Follow-
Selected Statement of Operations Data
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
Successor- Predecessor- Successor- Predecessor-
Consolidated Combined Consolidated Combined
2008 2007 2008 2007
Revenues
Well servicing $54,343,084 $30,911,863 $141,003,486 $70,815,164
Fluid logistics 50,802,304 24,927,025 123,265,951 73,824,746
Total revenues 105,145,388 55,838,888 264,269,437 144,639,910
Expenses
Well servicing 35,406,964 16,850,316 89,819,779 39,058,114
Fluid logistics 36,281,048 17,065,983 86,739,998 48,473,312
General and
administrative 4,511,599 3,576,245 12,371,906 6,089,872
Depreciation and
amortization 9,157,283 4,065,275 23,792,421 9,996,937
Total expenses 85,356,894 41,557,819 212,724,104 103,618,235
Operating income 19,788,494 14,281,069 51,545,333 41,021,675
Other income (expense)
Interest expense (6,532,810) (2,034,859) (19,091,945) (5,611,829)
Other income (expense) 2,493 33,525 109,060 58,563
Income before taxes 13,258,177 12,279,735 32,562,448 35,468,409
Income Tax Expense 4,928,570 - 52,509,787 -
Net income/(loss) $8,329,607 $12,279,735 $(19,947,339) $35,468,409
Earnings/(loss) per share
of common stock
Basic $0.15 $(0.49)
Diluted 0.15 (0.49)
Weighted average number
of shares outstanding
Basic 54,144,700 40,653,076
Diluted 54,144,700 40,653,076
Selected Balance Sheet Data
(Unaudited)
September 30, December 31,
2008 2007
Cash $10,027,617 $5,209,345
Accounts receivable 79,522,105 42,998,005
Working Capital (154,296) (28,247,697)
Goodwill and other intangibles 72,773,122 -
Total assets 518,594,889 259,995,166
Total debt 215,588,885 111,281,004
Deferred tax liability 47,828,963 500
Members'/Stockholders' equity $167,889,005 $70,459,267
Selected Operating Data
Three Months Ended September 30
2008 2007
Working days 64 61
Rig Hours 107,520 48,759
Truck hours 313,750 182,906
Reconciliation of EBITDA to Net Income
(Unaudited)
(in thousands)
Three Months Ended Nine Months Ended
September 30 September 30
2008 2007 2008 2007
Net Income (loss) $8,330 $12,280 $(19,947) $35,468
Depreciation and amortization 9,157 4,065 23,792 9,997
Interest expense 6,533 2,035 19,092 5,612
Income tax expense 4,929 - 52,510 -
EBITDA $28,949 $18,380 $75,447 $51,077
Contacts: Forbes Energy Services Ltd.
L. Melvin Cooper, SVP & CFO
361-664-0549
DRG&E
Ken Dennard, Managing Partner
Ben Burnham, AVP
713-529-6600
SOURCE Forbes Energy Services Ltd.
-- Revenues increased to $105.1 million for the third quarter of 2008 from $88.6 million during the second quarter of 2008;
-- EBITDA increased to $28.9 million for the third quarter of 2008 from $25.8 million for the second quarter of 2008;
-- Well servicing rig count increased to 169 as of September 30, 2008 from 149 at June 30, 2008. Six of these rigs were being "rigged up" at September 30, 2008.
-- Fluid transport heavy truck fleet increased to 362 as of September 30, 2008 from 328 at June 30, 2008.
EBITDA is defined as net income before interest, taxes, depreciation and amortization. For a reconciliation of EBITDA to net income, please see the disclosures at the end of this release.
Net income for the three months ended September 30, 2008 was $8.3 million or $0.15 per diluted share. Net loss for the nine months ended September 30, 2008 was $19.9 million, or $0.49 loss per share, which includes a one-time, non-cash $46.4 million charge for deferred income taxes related to the Company's reorganization into a taxable entity that occurred simultaneous with its IPO on May 29, 2008.
John Crisp, Forbes Energy's President and Chief Executive Officer, stated, "We delivered strong results this quarter despite several days of hurricane- related downtime in September. Our utilization remains strong although we do anticipate at least a moderate slowdown in activity during the coming months due to lower commodity prices and a slowing economy. As a result, we have scaled back our capital expenditure budget for the rest of 2008 and 2009. Our capital expenditure plans are very flexible, and will continue to evolve with ever-changing market conditions."
Business Segment Results
Well Servicing
Well servicing revenues increased to $54.3 million during the third quarter of 2008 compared to $47.4 million in the second quarter of 2008. Well servicing segment gross margins in the third quarter of 2008 were $18.9 million, compared to $17.4 million in the second quarter of 2008.
Forbes recorded approximately 107,520 rig hours for the third quarter of 2008, compared to 97,860 in the second quarter of 2008. The Company has increased its well service fleet to 169 rigs at September 30, 2008 from 149 as of June 30, 2008, an increase of 20 rigs during the quarter. Six of these rigs were being "rigged up" as of September 30, 2008 and therefore did not contribute to operating results for the third quarter. Equipment additions for the well servicing segment totaled $28.2 million during the three months ended September 30, 2008.
Fluid Logistics
Fluid logistics revenues in the third quarter of 2008 increased to $50.8 million compared to $41.2 million in the second quarter of 2008. The increase was primarily the result of additional equipment and an expanded customer base. Gross margins for the fluid logistics segment totaled $14.5 million compared to $13.1 million in the previous quarter.
Forbes recorded 313,750 truck hours during the third quarter of 2008 compared to 271,968 for the second quarter of 2008. The Company increased its fluid transport segment heavy truck fleet to 362 as of September 30, 2008 as compared to 328 as of June 30, 2008. Total equipment additions for the fluid logistics segment were $16.0 million for the three months ended September 30, 2008.
Conference Call
Forbes Energy will host a conference call to discuss its third quarter 2008 results on Friday, November 14, 2008, at 9:00 a.m. Eastern Time (8:00 a.m. Central). To access the call, please dial (303) 275-2170 and ask for the "Forbes Energy Services" call at least 10 minutes prior to the start time. The conference call will also be broadcast live via the Internet and can be accessed through the "Corporate" page of Forbes Energy's website, www.forbesenergyservices.com.
A telephonic replay of the conference call will be available until November 21, 2008 and may be accessed by calling (303) 590-3000 and using the pass code 11121428#. A webcast archive will be available at www.forbesenergyservices.com shortly after the call and will be accessible for approximately 30 days. For more information, please contact Donna Washburn at DRG&E at (713) 529-6600 or email at dmw@drg-e.com.
About Forbes Energy
Forbes Energy Services Ltd. is an independent oilfield services contractor that provides a broad range of drilling-related and production-related services to oil and natural gas companies, primarily onshore in Texas, Mississippi, and Mexico.
Forward-Looking Statements and Regulation G Reconciliation
This press release contains "forward-looking statements," as contemplated by the Private Securities Litigation Reform Act of 1995, in which the Company discusses factors it believes may affect its performance in the future. The accuracy of the Company's assumptions, expectations, beliefs and projections depend on events or conditions that change over time and are thus susceptible to change based on actual experience, new developments and known and unknown risks. The Company gives no assurance that the forward-looking statements will prove to be correct and does not undertake any duty to update them. The Company's actual future results might differ from the forward-looking statements made in this press release for a variety of reasons, which include: supply and demand for oilfield services and industry activity levels; potential for excess capacity; competition; and substantial capital requirements. Should one or more of the foregoing risks or uncertainties materialize, or should the Company's underlying assumptions prove incorrect, the Company's actual results may vary materially from those anticipated in its forward-looking statements, and the Company's business, financial condition and results of operations could be materially and adversely affected. Additional factors that you should consider are set forth in detail in the Risk Factors section of the Company's most recent quarterly report on Form 10- Q as well as other filings the Company has made with the Securities and Exchange Commission.
Forbes Energy's financial statements and management's discussion and analysis of financial condition and results of operations can be found in the Company's quarterly report on form 10-Q, which will be filed with the Securities and Exchange Commission and posted on the Company's website.
This press release also contains references to the non-GAAP financial measure of earnings, or net income, before interest, income taxes, depreciation and amortization, or EBITDA. For a reconciliation of EBITDA to net income, please see the table at the end of this release. Management's opinion regarding the usefulness of EBITDA to investors and a description of the ways in which management uses such measures can be found on the "Corporate" page of Forbes Energy's website, www.forbesenergyservices.com.
-Tables to Follow-
Selected Statement of Operations Data
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
Successor- Predecessor- Successor- Predecessor-
Consolidated Combined Consolidated Combined
2008 2007 2008 2007
Revenues
Well servicing $54,343,084 $30,911,863 $141,003,486 $70,815,164
Fluid logistics 50,802,304 24,927,025 123,265,951 73,824,746
Total revenues 105,145,388 55,838,888 264,269,437 144,639,910
Expenses
Well servicing 35,406,964 16,850,316 89,819,779 39,058,114
Fluid logistics 36,281,048 17,065,983 86,739,998 48,473,312
General and
administrative 4,511,599 3,576,245 12,371,906 6,089,872
Depreciation and
amortization 9,157,283 4,065,275 23,792,421 9,996,937
Total expenses 85,356,894 41,557,819 212,724,104 103,618,235
Operating income 19,788,494 14,281,069 51,545,333 41,021,675
Other income (expense)
Interest expense (6,532,810) (2,034,859) (19,091,945) (5,611,829)
Other income (expense) 2,493 33,525 109,060 58,563
Income before taxes 13,258,177 12,279,735 32,562,448 35,468,409
Income Tax Expense 4,928,570 - 52,509,787 -
Net income/(loss) $8,329,607 $12,279,735 $(19,947,339) $35,468,409
Earnings/(loss) per share
of common stock
Basic $0.15 $(0.49)
Diluted 0.15 (0.49)
Weighted average number
of shares outstanding
Basic 54,144,700 40,653,076
Diluted 54,144,700 40,653,076
Selected Balance Sheet Data
(Unaudited)
September 30, December 31,
2008 2007
Cash $10,027,617 $5,209,345
Accounts receivable 79,522,105 42,998,005
Working Capital (154,296) (28,247,697)
Goodwill and other intangibles 72,773,122 -
Total assets 518,594,889 259,995,166
Total debt 215,588,885 111,281,004
Deferred tax liability 47,828,963 500
Members'/Stockholders' equity $167,889,005 $70,459,267
Selected Operating Data
Three Months Ended September 30
2008 2007
Working days 64 61
Rig Hours 107,520 48,759
Truck hours 313,750 182,906
Reconciliation of EBITDA to Net Income
(Unaudited)
(in thousands)
Three Months Ended Nine Months Ended
September 30 September 30
2008 2007 2008 2007
Net Income (loss) $8,330 $12,280 $(19,947) $35,468
Depreciation and amortization 9,157 4,065 23,792 9,997
Interest expense 6,533 2,035 19,092 5,612
Income tax expense 4,929 - 52,510 -
EBITDA $28,949 $18,380 $75,447 $51,077
Contacts: Forbes Energy Services Ltd.
L. Melvin Cooper, SVP & CFO
361-664-0549
DRG&E
Ken Dennard, Managing Partner
Ben Burnham, AVP
713-529-6600
SOURCE Forbes Energy Services Ltd.
Fortress Energy Inc. Announces Third Quarter 2008 Financial and Operating Results
CALGARY, ALBERTA, Nov 14, 2008 (Marketwire via COMTEX) -- Fortress Energy Inc. ("Fortress" or the "Company") (TSX:FEI) announces results for the third quarter ended September 30, 2008.
Corporate Highlights
- Production has increased 44% to 1,478 for the third quarter of 2008 compared to the third quarter 2007. There remains additional production capacity which is constrained by the processing limitations of third party production facilities.
- Cash flow increased 82% for the nine months ended September 2008 to $5,844,000 or $0.22 per share compared to $3,210,000 for the nine month period ended September 30, 2007.
- Achieved net income after tax of $1,070,000 or $0.04 per share for the third quarter of 2008.
- Completed a $16.55 million equity financing resulting in net indebtedness being $18,026,000 for the three months ended September 30, 2008.
- Sold forward 55% of production until March 2010 to realize an average price of $8.41 per mcf.
- Drilling two high impact exploration wells prior to year-end.
Commodity Prices
During the third quarter of 2008 the Company experienced a significant decrease in natural gas prices. Well head spot reference price was pricing was $9.63 per mcf in July, 2008 and decreased to $6.18 per mcf in September, 2008. Although we remain bullish over the long term regarding the fundamentals for natural gas pricing we believe that the natural gas prices over the ensuing year will remain relatively weak. All of our product sales trade in reference to US dollars, a falling Canadian dollar helps mitigate the impact of declining natural gas prices as the majority of our costs are in Canadian dollars.
Hedging Program
Considering the uncertainty over economic conditions and the variations of supply and demand balances, Fortress has undertaken the following forward sale transactions to provide better certainty of cash flow through to March 2010.
In fourth quarter of 2007 the Fortress made a decision to sell forward 5,000 GJ/d being 60% of its production at the equivalent price of $7.16 per mcf until October 30, 2008. This has resulted in an average realized price of $7.69 per mcf compared to an average reference spot price of $8.51 per mcf over the nine months ended September 30, 2008. During the third quarter of 2008, Fortress sold forward 5,000 GJ/d at the equivalent price of $9.44 per mcf from November 1, 2008 until March 31, 2009. Also during the third quarter of 2008, Fortress has sold forward 5,100 GJ/d at the equivalent price of $7.92 per mcf from April 1, 2009 until December 31, 2009. Recently the Company sold forward 2,600 GJ/d at the equivalent price of $9.22 per mcf from January 1, 2010 until March 31, 2010.
The effect of these transactions is that an estimated 55% of Fortress's production is sold forward at an average price of $8.41 per mcf until March 31, 2010.
08/09 Winter Capital Program
The Company remains dedicated to our capital budget philosophy, which is to fund capital programs based on available cash flow from operations. Most of the Fortress's operations are conducted during the winter months from December until mid to late March. Fortress's capital expenditures planned for the 2009/10 winter program will amount to approximately $8.5 million which is expected to be in line with the expected 2009 cash flow.
Development Activity - Square Creek and Ladyfern
Fortress will be pursuing two additional development wells to further delineate the Square Creek Bluesky and Notikewin pools. One of the locations will be drilled and completed as a dual zone, optimizing production and reducing capital deployed. Fortress is working with the owner of the Clear Prairie facility to debottleneck the facility and associated infrastructure, thereby allowing an increase in net production from the current rate of 466 boe per day to 650 boe per day and accommodating additional gas volumes expected from the 2008/2009 winter capital program.
Fortress has over 50 development locations on it properties in the Ladyfern area in which it owns between 60% and 100% working interest. The Company is planning on pursuing a number of development drilling locations as part of the 08/09 winter capital program.
Exploration Activity - Square Creek, Clear Prairie and Pine Creek
During the winter 07/08, Fortress constructed a 41 km pipeline and natural gas processing facility to service the Square Creek area along which the Company owns approximately 40,000 net acres of undeveloped land. Fortress has identified a two new multi zone drilling prospects on it lands from 2D it had acquired and 3D seismic it has access to. One well will be drilled prior to year end offsetting the existing Square Creek Blue Sky and Notikewin pools currently producing 5.8mmcf/d. An additional well will be drilled prior to February 15, 2009 targeting Bluesky, Charlie Lake and Notikewin formations. If either of these wells is successful, it will lead to further multi-well development activity in future years.
Fortress will commence drilling a high-impact exploration well in the Pine Creek area on its 100% owned lands in late November 2008. The drilling location is offsetting a well currently producing 5.0 mmcf/d. If successful, this well can be placed on stream in the first quarter of 2009.
Balance Sheet
Fortress ends the quarter with a net debt of $18.0 million and a line of credit from the Alberta Treasure Branches of $25 million. The Company has no requirements to raise additional financing, despite an aggressive 2008/09 capital spending program being undertaken. In September 2008, the Company re-filed its income tax returns for the 1997 to 1999 tax years to claim additional scientific research and experimental development ("SR&ED") credits related to the bio-technology business of its predecessor company. These additional claims could result a refund of approximately $3.4 million to the Company. The Company has not recorded this refund at September 30, 2008.
Operating Costs
Fortress has experience a significant increase in third party charges related to field activities and as a consequence unit operating costs have increased to $14.48/boe for the nine months ended September 30, 2008 compared to $9.21/boe for the nine months ended September 30, 2007. During the third quarter of 2008, Fortress has undertaken a program to reduce operating costs and have acquired rental equipment and will be increasing volumes at Square Creek which will have the effect of allocating the fixed portion of operating costs over a larger volume of production thereby reducing per unit operating costs. The impact of these changes will not be seen until the fourth quarter of 2008 and the first quarter of 2009.
Mr. Bailey said .... "we continue to make progress towards growing production and developing a profitable business even with the uncertainty that surrounds the general market. The forward sale arrangements that are in place through to March 2010 will provide certainty of cash flow and allow us to continue to grow by developing our projects."
Investor Conference Call
Fortress would like to invite interested investors and shareholders to take part in a conference call scheduled for 3:00pm MST (5:00pm EST) Wednesday, November 19th, 2008. To access the call, please dial 416-695-9757 or 866-542-4270 and mention the name Fortress.
Replay of Conference Call
Fortress will also host a replay of the investor call which will be available for a week following the call. For those who are unable to dial in to the scheduled call, the number and passcode below will allow a replay of the call at any time before 11:59 November 27, 2008.
Dial-in number(s): 416-695-5800 / 800-408-3053 Passcode: 3275498
Prompts: Name, Company and Phone Number
FINANCIAL AND OPERATING SUMMARY ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended September 30, 2008 September 30, 2007 ($000's) $/boe ($000's) $/boe ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Petroleum and natural gas sales 6,591 48.44 2,893 30.67 Realized gain (loss) on commodity contracts (1,047) (7.70) 261 2.77 ---------------------------------------------------------------------------- 5,544 40.74 3,154 33.44 Royalties (1,158) (8.51) (380) (4.03) Operating costs (2,139) (15.72) (973) (10.31) ---------------------------------------------------------------------------- Operating netback (1) 2,247 16.51 1,801 19.10 General and administrative expenses (693) (5.09) (848) (8.99) Net interest expense (361) (2.65) (448) (4.75) ---------------------------------------------------------------------------- Funds from operations (1) 1,193 8.77 505 5.36 Unrealized gain (loss) on commodity contracts 4,323 31.77 (35) (0.37) Depletion, depreciation and accretion (3,805) (27.97) (2,536) (26.87) Stock-based compensation expense (77) (0.57) (150) (1.59) Gain (loss) on sale of pipeline asset 124 0.91 - - ---------------------------------------------------------------------------- Income (loss) before income taxes 1,758 12.91 (2,216) (23.47) Future income tax recovery (expense) (688) (5.06) 613 6.50 ---------------------------------------------------------------------------- Net income (loss) 1,070 7.85 (1,603) (16.97) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Sales volume (boe/d) 1,478 1,025 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Nine months ended September 30, 2008 September 30, 2007 ($000's) $/boe ($000's) $/boe ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Petroleum and natural gas sales 20,195 52.55 9,499 38.61 Realized gain (loss) on commodity contracts (2,232) (5.81) 358 1.44 ---------------------------------------------------------------------------- 17,963 46.74 9,857 40.05 Royalties (3,421) (8.90) (1,371) (5.57) Operating costs (5,565) (14.48) (2,268) (9.21) ---------------------------------------------------------------------------- Operating netback (1) 8,977 23.36 6,218 25.27 General and administrative expenses (2,084) (5.42) (2,583) (10.50) Net interest expenses (1,049) (2.73) (425) (1.73) ---------------------------------------------------------------------------- Funds from operations (1) 5,844 15.21 3,210 13.04 Unrealized gain (loss) on commodity contracts 1,333 3.47 73 0.30 Depletion, depreciation and accretion (10,627) (27.65) (6,585) (26.75) Stock-based compensation expense (149) (0.39) (429) (1.74) Gain (loss) on sale of pipeline asset (428) (1.11) - - ---------------------------------------------------------------------------- Income (loss) before income taxes (4,027) (10.47) (3,731) (15.15) Future income tax recovery (expense) 898 2.34 1,203 4.89 ---------------------------------------------------------------------------- Net income (loss) (3,129) (8.13) (2,528) (10.26) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Sales volume (boe/d) 1,403 901 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- (1) Non-GAAP measures. See discussion in the following MD&A.
MANAGEMENT'S DISCUSSION AND ANALYSIS
November 14, 2008
Management's discussion and analysis ("MD&A") should be read in conjunction with the unaudited interim financial statements of Fortress Energy Inc. ("Fortress" or the "Company") as at and for the three and nine months ended September 30, 2008 and the audited consolidated financial statements of Fortress Energy Inc. for the year ended December 31, 2007. The interim financial statements have been prepared in accordance with Canadian Generally Accepted Accounting Principles ("GAAP"). All tabular amounts in the following discussion are in thousands of Canadian dollars unless otherwise noted. Additional information is available on the Company's web site at http://www.fortressenergy.ca/ or under the Company's profile at http://www.sedar.com/.
This MD&A provides management's analysis of Fortress' historical financial and operating performance based on information currently available. Actual results will vary from estimates and variances may be significant. Historical results are not indicative of future performance.
Non-GAAP Measurements
The terms "funds from operations" and "operating netback" used in this MD&A are not recognized measures under GAAP. Management believes that in addition to net income, funds from operations and operating netback are useful supplemental measures as they provide an indication of the results generated by the Company's principal business activities before the consideration of how those activities are financed. Investors are cautioned, however, that these measures should not be construed as alternatives to net income determined in accordance with GAAP, as an indication of the Company's performance.
The Company's method of calculating funds from operations may differ from that of other companies, and, accordingly it may not be comparable to measures used by other companies. The Company calculates funds from operations by taking cash flow from operating activities as determined under GAAP before changes in non-cash operating working capital and abandonment expenditures. The statements of cash flows included in the financial statements present the reconciliation between net income (loss) and funds from operations. A summary of this reconciliation is as follows:
---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ($000's) Three months ended Nine months ended September September September September 30, 2008 30, 2007 30, 2008 30, 2007 ---------------------------------------------------------------------------- Cash provided by (used in) operating activities 1,315 (879) 9,893 2,905 Change in non-cash operating working capital (122) 1,384 (4,130) 305 Abandonment expenditures - - 81 - ---------------------------------------------------------------------------- Funds from operations 1,193 505 5,844 3,210 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
Funds from operations per share is calculated using the weighted average basic and diluted shares used to calculate earnings per share.
Operating netback is calculated as the average unit sales price less royalties, realized gain (loss) on commodity contracts, and operating expenses. Operating netback represents the cash margin for every barrel of oil equivalent and is a common benchmark used in the oil and gas industry. There is no GAAP measure that is reasonably comparable to operating netback.
BOE Presentation
Natural gas reserves and volumes recorded in thousand cubic feet are converted to barrels of oil equivalent ("boe") on the basis of six thousand cubic feet ("mcf") of gas to one barrel ("bbl") of oil. The term "barrels of oil equivalent" may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf to 1 bbl is based on an energy equivalent conversion method primarily applicable at the burner tip and does not represent a value equivalent at the wellhead.
Forward Looking Statements
Statements in this MD&A may contain forward looking information including expectations of future production, components of cash flow and earnings, expected future events and/or financial results that are forward looking in nature and subject to substantial risks and uncertainties. Without limiting the generality of the foregoing, the Company has made materially forward looking statements:
(i) under the heading "Corporate Highlights" and "Share Capital" regarding the use of proceeds of the equity financing for the 2009 capital program and working capital requirements;
(ii) Under the heading "Corporate Highlights" regarding the Pine Creek exploration well and anticipated timing of production; and
(iii) Under the heading "Production" regarding the anticipated resolution of plant capacity issues.
The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. The Company cautions the readers that actual performance will be affected by a number of factors, as many may respond to changes in economic and political circumstances throughout the world. Events or circumstances may cause actual results to differ materially from those predicted, a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the Company. These risks include, but are not limited to: the risks associated with the oil and gas industry, commodity prices and exchange rate changes; industry related risks could include, but are not limited to, operational risks in exploration, development and production (applicable to the forward looking statements (i) through (iii) above), delays or changes in plans (applicable to the forward looking statements identified in (i) through (iii) above); risks associated with the uncertainty of reserve estimates, health and safety risks and the uncertainty of estimates and projections of production, costs and expenses. These external factors beyond the Company's control may affect the marketability of oil and natural gas produced, industry conditions including changes in laws and regulations, changes in income tax regulations, increased competition, fluctuations in commodity prices, interest rates, and variations in the Canadian/United States dollar exchange rate. The reader is cautioned not to place undue reliance on this forward looking information.
Statements throughout this MD&A that are not historical facts may be considered "forward looking statements." These forward looking statements sometimes include words to the effect that management believes or expects a stated condition or result. All estimates and statements that describe the Company's objectives, goals or future plans are forward looking statements. Since forward looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to any number of risks including, but not limited to:
(i) Risks associated with the oil and gas industry and regulatory bodies (e.g. operational risks in exploration, development and production, or changes in royalty rates);
(ii) Delays or changes in plans with respect to exploration or development projects or capital expenditures;
(iii) Uncertainty of estimates and projections relating to recoverable reserves, costs and expenses;
(iv) Health, safety and environmental risks; and
(v) Commodity price and exchange rate fluctuations.
In making its forward looking statements, the Company used among other things, the following material factors or assumptions: the 2009 capital program will proceed as anticipated, drilling will result in a commercial discovery and that parties can reach agreement as to expansion of plant capacity.
Forward looking statements contained herein are made as of the date hereof subject to the requirements of applicable securities legislation and except as otherwise required by law, the Company assumes no obligation to update any forward looking statements, whether as a result of new information, future events or results or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, the reader is cautioned not to place undue reliance on forward looking statements.
DESCRIPTION OF THE BUSINESS
Fortress' primary focus is the exploration and development of natural gas reserves in Western Canada. The Company has approximately 93,000 net acres of undeveloped land in the Ladyfern, Velma and Buick Creek areas in NE British Columbia and the Chigwell, Bashaw, Square Creek, Halverson, Mearon and Dahl areas of Alberta.
The Company's strategy is to 'acquire and exploit' properties that are early in their development cycle that offer exploration, appraisal and development drilling opportunities, while maintaining low finding and development costs. Fortress operates most of its production enabling it to have complete control over cost management of its capital programs.
CORPORATE HIGHLIGHTS
The results for the three months ended September 30, 2008 are as follows:
- The Company completed the third closing of a $16.5 million ($14.7 million net of issuance costs) equity financing that was announced in May. The proceeds will be used to fund the Company's 2009 capital program and working capital requirements.
- Fortress announced plans to purchase certain of its common shares by way of a normal course issuer bid through the facilities of the Toronto Stock Exchange (the "TSX"). Fortress may purchase up to a maximum of 1,351,014 common shares, which represents approximately 5% of its current issued and outstanding common shares, during the twelve month term of the issuer bid. As of November 14, 2008, the Company has acquired 45,000 shares at an average price of $0.41 per share.
- Fortress will commence drilling a high-impact exploration well in the Pine Creek area on its 100% owned lands in late November 2008. The drilling location is offsetting a well currently producing 5.0 mmcf/d. If successful, this well will be placed on production in the first quarter of 2009.
DETAILED FINANCIAL ANALYSIS Production ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended Nine months ended September September September September 30, 2008 30, 2007 30, 2008 30, 2007 ---------------------------------------------------------------------------- Sales volume: Natural gas (mcf/d) 8,733 6,111 8,272 5,302 Oil and NGL's (bbl/d) 23 7 24 17 Total(boe/d) 1,478 1,025 1,403 901 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
Sales volumes for the three months ended September 30, 2008 were 1,478 boe/d compared to 1,025 boe/d for the three months ended September 30, 2007 - an increase of 453 boe/d or 44%. This increase is due to an asset acquisition in the Ladyfern, Mearon and Velma areas in July 2007, the start up of two wells at Velma in late August 2007, and the start up of 5 wells (2.5 net) at Square Creek in late March 2008. The anticipated sales volume on the start up of the Square Creek area was approximately 540 boe/d compared to an actual sales volume for the third quarter of 448 boe/d - an increase of 49 boe/d from the prior quarter. Capacity constraints at the Clear Prairie facility that processes gas from the Square Creek area have resulted in the Company producing the Square Creek area at much lower rates than anticipated. Two wells remain shut-in and others are flowing at reduced rates while the Company works with the third party plant operator to resolve the capacity issues which are currently expected to be resolved in the first quarter of 2009. The Velma wells are tied into the Ladyfern gathering system and the start-up of these wells increased the line pressures and reduced production volumes at Ladyfern resulting in the need for added compression. In the first quarter of 2008 the Company added compression to restore lost production; however, mechanical issues have resulted in substantial down time and with no significant production gains from this area. These compressor issues are on-going and the Company is continuing to work with the manufacturer to resolve the issues.
Sales volumes for the nine months ended September 30, 2008 were 1,403 boe/d compared to 901 boe/d for the nine months ended September 30, 2007. This increase is due to the asset acquisition in July 2007 and the start up of wells in the Velma and Square Creek areas.
Revenue ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended Nine months ended September September September September 30, 2008 30, 2007 30, 2008 30, 2007 ---------------------------------------------------------------------------- Petroleum and natural gas sales ($000's) 6,591 2,893 20,195 9,499 ---------------------------------------------------------------------------- Average realized prices: Natural gas ($/mcf) 7.99 5.07 8.66 6.36 Realized gain (loss) on commodity contracts ($/mcf) (1.28) 0.46 (0.97) 0.24 ---------------------------------------------------------------------------- Realized natural gas price ($/mcf) 6.71 5.53 7.69 6.60 Oil and NGLs ($/bbl) 82.29 71.42 86.35 65.29 ---------------------------------------------------------------------------- Total ($/boe) 40.74 33.44 46.74 40.05 ---------------------------------------------------------------------------- Benchmark prices: AECO average price ($/mcf) 7.76 5.12 8.51 6.56 Edmonton par ($/boe) 123.08 80.70 115.95 73.72 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
Petroleum and natural gas sales for the three months ended September 30, 2008 were $6,591,000 compared to $2,893,000 for three months ended September 30, 2007. This increase is attributable to a 44% increase in sales volumes and a 22% increase in the price of natural gas realized by the Company.
Petroleum and natural gas sales for the nine months ended September 30, 2008 were $20,195,000 compared to $9,499,000 for the nine months ended September 30, 2007. This increase is due to a 56% increase in sales volumes and 17% increase in sales prices realized in the nine months ended September 30, 2008 compared to the nine months ended September 30, 2007.
The average natural gas price realized by the Company for the third quarter of 2008 was $7.99/mcf (net of transportation costs and before realized losses on commodity contracts) compared to the AECO average price of $7.76/mcf. This compares to the average natural gas price realized in the third quarter of 2007 of $5.07/mcf (net of transportation costs and before realized gains on commodity contracts) and an AECO average price of $5.12/mcf. For the nine months ended September 30, 2008, the Company realized an average price for natural gas of $8.66/mcf (net of transportation costs and before realized losses on commodity contracts) compared to an average AECO price of $8.51/mcf. For the nine months ended September 30, 2007, the Company realized an average natural gas price of $6.36/mcf (net of transportation costs and before realized gains on commodity contracts) compared to an AECO average price of $6.56/mcf.
The Company's current production is approximately 99% natural gas and revenues are reliant on North American natural gas prices. Natural gas prices increased in the second quarter based on bullish sentiment including lower than expected LNG (liquefied natural gas) imports to the United States, lower Canadian production, and an extended outage at the Independence Hub in the Gulf of Mexico resulting in a decline in storage levels. Sentiment changed in July and natural gas prices declined from a high of more than $12/mcf based on fears of a global credit crunch and U.S. recession resulting in reduced demand for natural gas.
The Company uses commodity contracts to manage its exposure to fluctuations in the price of natural gas. In the third quarter of 2008, the Company realized a loss on commodity contracts of $1,047,000, or $1.28/mcf, and recorded an unrealized gain on commodity contracts of $4,323,000. For the nine months ended September 30, 2008, the Company realized a loss on commodity contracts of $2,232,000, or $0.97/mcf, and an unrealized gain on commodity contracts of $1,333,000. Approximately 54% of the Company's current production is under contract. Contracts in place as of September 30, 2008 are as follows:
---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Type Period Volume (GJ/d) Fixed Price ($/GJ) ---------------------------------------------------------------------------- Swap January 1, 2008 to October 31, 2008 2,000 6.51 Swap January 1, 2008 to October 31, 2008 3,000 6.505 Swap November 1, 2008 to March 31, 2009 1,250 9.58 Swap November 1, 2008 to March 31, 2009 3,750 8.25 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Royalties ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended Nine months ended September September September September 30, 2008 30, 2007 30, 2008 30, 2007 ---------------------------------------------------------------------------- Royalties ($000's) 1,158 380 3,421 1,371 $/boe 8.51 4.03 8.90 5.57 Percentage of petroleum and natural gas sales 17.6 12.0 16.9 13.9 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
Royalties were $1,158,000 for the three months ended September 30, 2008 compared to $380,000 for the three months ended September 30, 2007. This increase reflects increased volumes and natural gas prices, as noted previously. As a percentage of petroleum and natural gas sales (net of transportation costs and before realized gains/losses on commodity contracts), royalties increased to 17.6% in the third quarter of 2008 compared to 12.0% in the third quarter of 2007. This increase is attributed to increased production volumes from the Company's Velma, Mearon and Square Creek properties which record average royalty rates of 20% to 25%. The Company's wells at Ladyfern qualify for the Ultra-Marginal Royalty Program which assesses a reduced royalty rate for low producing wells in the province of British Columbia, resulting in an effective royalty rate of approximately 8% for these wells.
For the nine months ended September 30, 2008, the Company recorded royalties of $3,421,000 compared to $1,371,000 for the nine months ended September 30, 2007. As a percentage of petroleum and natural gas sales (net of transportation costs and before realized gains/losses on commodity contracts), royalties for the first nine months of 2008 were 16.9% compared to 13.9% for the comparable period in 2007. This increase is due to the change in property mix resulting from the asset acquisition in July 2007 and wells brought onto production since that time which have higher royalty rates than the average royalty rate realized by the Company.
Operating Expenses ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended Nine months ended September September September September 30, 2008 30, 2007 30, 2008 30, 2007 ---------------------------------------------------------------------------- Operating expenses ($000's) 2,139 973 5,565 2,268 $/boe 15.72 10.31 14.48 9.21 ---------------------------------------------------------------------------- Operating expenses ($000's) - adjusted for charges related to prior periods 2,031 973 5,457 2,268 $/boe 14.93 10.31 14.20 9.21 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
Operating expenses increased in the three months ended September 30, 2008 to $2,139,000 from $973,000 in the third quarter of 2007. This increase is due to higher operating costs being experienced across all fields with the most significant increase from the Square Creek area which recorded operating expenses of approximately $16.41/boe in the third quarter due to higher than anticipated third party plant operating expenses and plant capacity constraints that resulted in lower production levels. In addition, the Company incurred additional compression and processing charges related to its Bashaw field that related to prior periods but were invoiced to Fortress in the third quarter of 2008 and which amounted to $108,000, or $0.79/boe, for the three months ending September 30, 2008.
For the nine months ended September 30, 2008 operating expenses were $5,565,000 compared to $2,268,000 for the nine months ended September 30, 2007. One a per boe basis, operating expenses were $14.48/boe for the nine months ended September 30, 2008 compared to $9.21/boe for the nine months ended September 30, 2007. The largest factors affecting operating expenses are gas processing fees, contract operating fees, chemicals and equipment rentals which account for approximately 75% of the Company's operating expenses.
The Company is taking steps to reduce its operating expenses. On November 1, 2008, the Company acquired the compressor that it had been renting at Square Creek. The Company is also in discussions to acquire other rental equipment to reduce its operating expenses.
General and Administrative Expenses ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended Nine months ended September 30, September 30, 2008 2007 2008 2007 ---------------------------------------------------------------------------- Gross ($000's) 1,027 1,167 3,056 3,605 Partner recoveries ($000's) (112) - (350) - Capitalized ($000's) (222) (319) (622) (1,022) ---------------------------------------------------------------------------- Net ($000's) 693 848 2,084 2,583 $/boe 5.09 8.99 5.42 10.50 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
Net general and administrative expenses decreased to $693,000 in the third quarter of 2008 from $848,000 in the third quarter of 2007. Gross general and administrative expenses for the third quarter of 2008 reflect a 12% decrease from the third quarter of 2007 which is mainly attributable to a reduction in consulting fees charged to the Company.
Net general and administrative expenses decreased to $2,084,000 for the nine months ended September 30, 2008 from $2,583,000 for the nine months ended September 30, 2007. General and administrative expenses for the nine months ended September 30, 2008 were $5.42/boe compared to $10.50/boe for the nine months ended September 30, 2007. The decrease on a per boe basis is mainly due to an increase in production volumes in 2008 and reduced reliance on the use of consultants.
Partner recoveries reflect the portion of the Company's general and administrative expenses recoverable from partners related to the Company's capital program.
The Company's policy is to capitalize salaries, stock-based compensation, consulting fees and software costs that are directly attributable to exploration and development activities.
Stock-based Compensation Expense ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended Nine months ended September 30, September 30, 2008 2007 2008 2007 ---------------------------------------------------------------------------- Stock-based compensation expense ($000's): Stock options 93 150 125 429 Restricted stock units 35 - 155 - ---------------------------------------------------------------------------- 128 150 280 429 Stock-based compensation capitalized to property, plant and equipment (51) - (131) - ---------------------------------------------------------------------------- Net stock-based compensation expense 77 150 149 429 ---------------------------------------------------------------------------- $/boe 0.57 1.59 0.39 1.74 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
The net stock-based compensation expense for the three months ended September 30, 2008 was $77,000 compared to $150,000 for the three months ended September 30, 2007. The gross stock-based compensation for the three months ended September 30, 2008 was $128,000 of which $93,000 was attributable to stock options and $35,000 to restricted stock units. This compares to $150,000 for the three months ended September 30, 2007 which was attributable to stock options granted in January 2007 that were later cancelled in November 2007. For the three and nine months ended September 30, 2008, the Company capitalized stock-based compensation of $51,000 and $131,000, respectively, directly related to exploration and development activities (three and nine months ended September 30, 2007 - $nil).
The net stock-based compensation expense for the nine months ended September 30, 2008 was $149,000, a decrease of $280,000 from the nine month period ended September 30, 2007. In the nine months ended September 30, 2008, a total of 1,684,633 stock options and 500,000 restricted stock units were granted.
Interest Income and Expense
The Company recorded interest expense of $361,000 for the three months ended September 30, 2008 compared to $448,000 for the three months ended September 30, 2007. The Company recorded interest expense of 1,049,000 for the nine months ended September 30, 2008 compared to net interest expense in the nine months ended September 30, 2007 of $425,000. Interest expense in the first nine months of 2008 reflects interest on the Company's revolving credit facility and interest on unspent flow-through obligations. Net interest income for the nine months ended September 30, 2007 reflects interest earned on commercial paper investments prior to the reorganization of SignalEnergy Inc.
Depletion, Depreciation and Accretion Expense ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended Nine months ended September 30, September 30, 2008 2007 2008 2007 ---------------------------------------------------------------------------- Depletion and depreciation expense ($000's) 3,761 2,504 10,508 6,503 Accretion of asset retirement obligations ($000's) 44 32 119 82 ---------------------------------------------------------------------------- Total ($000's) 3,805 2,536 10,627 6,585 ---------------------------------------------------------------------------- Depletion and depreciation expense ($/boe) 27.65 26.54 27.34 26.42 Accretion of asset retirement obligations ($/boe) 0.32 0.33 0.31 0.33 ---------------------------------------------------------------------------- Total ($/boe) 27.97 26.87 27.65 26.75 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
Depletion and depreciation are calculated based on capital expenditures, production rates, and reserves. Depletion and depreciation expense was $3,761,000 for three months ended September 30, 2008 compared to $2,504,000 for the three months ended September 30, 2007. This increase is attributable to increased production volumes in the third quarter of 2008, which have increased 44% from the third quarter of 2007. The depletion and depreciation expense rate for the third quarter of 2008 was $27.65/boe compared to $26.54/boe for the third quarter of 2007. For the nine months ended September 30, 2008, the Company recorded depletion and depreciation expense of $10,508,000 compared to $6,503,000 for the nine months ended September 30, 2007.
Estimated future development costs for proved undeveloped properties included in the calculation of depletion expense at September 30, 2008 decreased to $15,842,000 from $28,600,000 at September 30, 2007. Undeveloped land costs at September 30, 2008 increased to $8,508,000 from $7,371,000 at September 30, 2007 and were excluded from assets subject to depletion. Undeveloped land costs increased with the acquisition of Crown lands at Pine Creek in the third quarter of 2008.
Accretion expense for the three months ended September 30, 2008 was $44,000 compared to $32,000 for the three months ended September 30, 2007. This increase is due to the asset acquisition in the Ladyfern, Mearon and Velma areas in July 2007 and additional wells brought onto production in the first quarter of 2008. For the nine months ended September 30, 2008 the Company recorded accretion expense of $119,000 compared to $82,000 for the nine months ended September 30, 2007. The Company completed the construction of a refrigeration plant and sweetening facilities in the second and third quarters of 2007 and acquired a partners working interest in the Ladyfern North, Mearon North and Velma areas in July 2007, significantly increasing the Company's asset retirement obligation. In addition, the Company added 5 wells (2.5 net) in the first quarter of 2008 including production and gathering facilities at Square Creek which have increased the asset retirement obligation.
Income Tax
The Company recorded a future income tax expense for the three months ended September 30, 2008 of $688,000 compared to a recovery of future income taxes of $613,000 for the three months ended September 30, 2007. For the nine months ended September 30, 2008, the Company recorded a recovery of future income taxes of $898,000 compared to $1,203,000 for the first nine months of 2007. Future income tax reflects the difference between the underlying tax value and carrying value of the Company's assets and liabilities. The change in future income taxes reflects capital costs incurred since the third quarter of 2007. Based on current commodity prices and planned capital expenditures, the Company does not expect to be cash taxable in 2008.
The income tax effect of a $5 million flow-through share offering completed in December 2007 was recorded in the first quarter of 2008 with the filing of the renouncement documents to the taxation authorities. The effective date of the renouncement was December 31, 2007 with all expenditures to be incurred by December 31, 2008. As of September 30, 2008, the Company has incurred approximately $1 million of eligible expenditures.
The estimated tax pools of the Company at September 30, 2008 are as follows:
---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ($000's) ---------------------------------------------------------------------------- Canadian Oil and Gas Property Expenses 16,406 Canadian Development Expenses 34,009 Canadian Exploration Expenses 11,383 Undepreciated Capital Cost 30,281 Share Issuance Costs 2,083 Investment Tax Credits 2,367 ---------------------------------------------------------------------------- 96,529 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Net Income (Loss) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended Nine months ended ($000's except per share and per boe September 30, September 30, amounts) 2008 2007 2008 2007 ---------------------------------------------------------------------------- Net income (loss) 1,070 (1,603) (3,129) (2,528) Net income (loss) per share - basic and diluted 0.04 (0.12) (0.16) (0.19) Net income (loss) per boe 7.85 (16.97) (8.13) (10.26) ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
The Company recorded net income of $1,070,000 for the three months ended September 30, 2008 compared to a net loss of $1,603,000 for the three months ended September 30, 2007. This translates into a basic and diluted net income per share of $0.04 for the three months ended September 30, 2008 compared to a basic and diluted net loss per share of $0.12 for the three months ended September 30, 2007. The change in net income in the three months ended September 30, 2008 is attributable to a net gain on commodity contracts of $3,276,000.
The net loss for the nine months ended September 30, 2008 was $3,129,000 compared to $2,528,000 for the nine months ended September 30, 2007. For the nine months ended September 30, 2008, the Company recorded a net loss on commodity contracts of 899,000 and a loss on the sale of a pipeline asset of $428,000.
Funds from Operations ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ($000's except share and per boe Three months ended Nine months ended amounts) September 30, September 30, 2008 2007 2008 2007 ---------------------------------------------------------------------------- Funds from operations 1,193 505 5,844 3,210 Funds from operations ($/boe) 8.77 5.36 15.21 13.04 Funds from operations per share - basic and diluted 0.04 0.04 0.29 0.24 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
Funds from operations for third quarter of 2008 were $1,193,000 compared to $505,000 for the third quarter of 2007. This increase is attributed to increased production volumes and realized prices. The operating netback realized by the Company for the three months ended September 30, 2008 decreased from $19.10/boe in the third quarter of 2007 to $16.51/boe due to an increase in realized losses on commodity contracts.
Funds from operations for the nine months ended September 30, 2008 increased to $5,844,000 from $3,210,000 for the nine months ended September 30, 2007. The increase is due to increased production and prices realized by the Company. The Company's operating netback for the nine months ended September 30, 2008 decreased by $1.91/boe compared to the nine months ended September 30, 2007 mainly due to an increase in operating expenses.
Capital Expenditures ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended Nine months ended September 30, September 30, ($000's) 2008 2007 2008 2007 ---------------------------------------------------------------------------- Land and seismic 1,578 117 2,161 194 Drilling and completions 48 553 5,089 10,126 Equipment and facilities (194) 4,813 15,801 9,107 Capitalized overhead costs 273 319 753 1,022 Abandonment expenditures - - 81 - Other 32 - 65 1,166 Acquisitions - 12,586 - 12,943 Dispositions - - (8,150) - ---------------------------------------------------------------------------- 1,737 18,388 15,800 34,558 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
The total capital expenditures for the three months ended September 30, 2008 were $1,737,000 compared to additions of $18,388,000 for the three months ended September 30, 2007. The most significant additions in the three months ended September 30, 2008 were the acquisition of the Pine Creek lands and trade seismic data over the Company's Halverson lands. In the third quarter of 2007 the Company completed an asset acquisition in the Ladyfern, Mearon and Velma areas for proceeds of $12,535,000, completed the construction of a refrigeration unit at Ladyfern and an 11 km pipeline at Velma to tie two wells to production facilities. The total capital expenditures for the nine months ended September 30, 2008 were $15,800,000 (net of dispositions) compared to $34,588,000 for the nine months ended September 30, 2007. The capital program for the first quarter of 2008 was focused on the follow-up to the discovery of the Bluesky and Notikewin gas pools from the 2007 winter drilling program and compression and optimization at Ladyfern. Fortress drilled two additional wells in the Bluesky formation and three wells in the Notikewin to better delineate the two structures. The Company also constructed a 10 mmcf/d gathering and production facility to service eight wells it has in the Square Creek area.
The Company completed the construction of a 41 km pipeline to deliver gas to the Clear Prairie gas plant to service the Square Creek area, the corridor along which it owns 41,800 net acres of land opening up a significant exploration area for the Company. The pipeline was completed and commissioned in March 2008 for a total cost of $8,578,000 and was sold to a mid-stream service provider in April for proceeds of $8,150,000 resulting in a loss on the sale of the pipeline asset of $428,000.
Share Capital ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended Nine months ended September 30, September 30, 2008 2007 2008 2007 ---------------------------------------------------------------------------- Weighted average common shares outstanding - basic 26,964,795 13,266,288 19,937,734 13,263,711 Weighted average common shares outstanding - diluted 27,004,567 13,266,288 19,937,734 13,263,711 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Outstanding securities ---------------------------------------------------------------------------- Common shares 27,020,288 Warrants 5,516,700 Stock options 2,081,635 ---------------------------------------------------------------------------- Total outstanding securities at September 30, 2008 34,618,623 Common shares acquired under normal course issuer bid (45,000) ---------------------------------------------------------------------------- Total outstanding securities at November 14, 2008 34,573,623 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
On December 21, 2007, the Company closed a public offering of 2,703,000 flow-through common shares at $1.85 per share for total gross proceeds of $5,000,550 ($4,395,000 net of share issuance costs). The full expenditure commitment was renounced to subscribers effective December 31, 2007 with all expenditures to be incurred by December 31, 2008. As of September 30, 2008, the Company has incurred eligible expenditures of approximately $1,000,000.
The Company closed a public offering of 11,033,400 units ("Units") on June 20, 2008, June 27, 2008 and July 4, 2008, for gross proceeds of $16,550,100 ($14,737,000 net of issuance costs). Each Unit consists of one common share of the Company and one-half of one common share purchase warrant. The warrants are exercisable on or before September 20, 2011 subject to the right of the Company to accelerate the expiry time on not less than 30 days notice to the warrant holders, if the aggregate sales price of the common shares during a period of 20 consecutive days divided by the aggregate number of common shares sold is at least $3.00. Each whole warrant entitles the holder to purchase one common share an at exercise price of $2.00. The proceeds of the financing will be used to fund the Company's 2009 capital program and working capital requirements.
Liquidity and Capital Resources
The Company has a $25,000,000 revolving, demand credit facility with its bank (the "Bank"), bearing interest at the Bank's prime lending rate plus 0.25% (effective interest rate for the three and nine months ended September 30, 2008 of 5.00% and 5.25% respectively, and for the three and nine months ended September 30, 2007 - 6.5%) and collateralized by an interest over all present and after acquired property of the Company. The authorized limit is subject to annual review and re-determination of the Company's borrowing base by the Bank. The Company has a $1,000,000 letter of credit which reduces its borrowing capacity on the revolving operating loan.
The credit facility has a covenant that requires the Company to maintain its working capital ratio at 1:1 or greater while the credit facility is outstanding. The working capital ratio is defined as current assets plus the unutilized portion of the credit facility divided by current liabilities less the balance drawn against the credit facility. The Company is in compliance with the working capital covenant at September 30, 2008.
Cash provided by operating activities was $1,315,000 for the third quarter of 2008 compared to cash used in operating activities of $879,000 for the third quarter of 2007. This increase is due to an increase in non-cash working capital balances and funds from operations in the three months ended September 30, 2008. Cash provided by operating activities for the nine months ended September 30, 2008 was $9,893,000 compared to $2,905,000 for the nine months ended September 30, 2007. This increase is due to increased funds from operations and changes in non-cash working capital balances. Funds from operations were $5,844,000 for the nine months ended September 30, 2008 compared to $3,210,000 for the nine months ended September 30, 2007.
Cash provided by financing activities for the three months ended September 30, 2008 was $3,363,000 compared to $17,630,000 for the three months ended September 30, 2007. On July 4, 2008, the Company completed the third closing of a $16,550,100 financing that was announced in May. The net proceeds received on the July 4 closing was $2,024,000. Cash provided by financing activities for the three months ended September 30, 2007 consisted of an increase in the Company's operating loan resulting from the asset acquisition completed in July 2007. Cash provided by financing activities for the nine months ended September 30, 2008 was $11,968,000 compared to cash used in financing activities for the nine months ended September 30, 2007 of $6,216,000. In the first quarter of 2007, the Company redeemed 23,076,923 common shares as part of its reorganization of Signal for $30,471,000 and in July secured a $24,000,000 bank operating loan.
Cash used in investing activities for the third quarter of 2008 was $4,680,000 compared to $16,758,000 for the third quarter of 2007. The Company's capital expenditures were $1,737,000 in the third quarter of 2008 compared to $18,388,000 in the third quarter of 2007. Cash used in investing activities for the nine months ended September 30, 2008 was $21,869,000 compared to $33,392,000 for the nine months ended September 30, 2007. In the second quarter of 2008, the Company recorded the sale of a 41 km pipeline connecting the Square Creek area to processing facilities for $8,150,000.
Related Party Transactions
(a) In the three and nine months ended September 30, 2008, the Company was charged $218,000 and $794,000 respectively (three and nine months ended September 30, 2007 - $81,000), in legal fees by a law firm where a director of the Company is a partner, of which $123,000 is included in accounts payable and accrued liabilities at September 30, 2008.
(b) In the three and nine months ended September 30, 2008, the Company was charged $25,000 (three and nine)
For full details for FEI
Corporate Highlights
- Production has increased 44% to 1,478 for the third quarter of 2008 compared to the third quarter 2007. There remains additional production capacity which is constrained by the processing limitations of third party production facilities.
- Cash flow increased 82% for the nine months ended September 2008 to $5,844,000 or $0.22 per share compared to $3,210,000 for the nine month period ended September 30, 2007.
- Achieved net income after tax of $1,070,000 or $0.04 per share for the third quarter of 2008.
- Completed a $16.55 million equity financing resulting in net indebtedness being $18,026,000 for the three months ended September 30, 2008.
- Sold forward 55% of production until March 2010 to realize an average price of $8.41 per mcf.
- Drilling two high impact exploration wells prior to year-end.
Commodity Prices
During the third quarter of 2008 the Company experienced a significant decrease in natural gas prices. Well head spot reference price was pricing was $9.63 per mcf in July, 2008 and decreased to $6.18 per mcf in September, 2008. Although we remain bullish over the long term regarding the fundamentals for natural gas pricing we believe that the natural gas prices over the ensuing year will remain relatively weak. All of our product sales trade in reference to US dollars, a falling Canadian dollar helps mitigate the impact of declining natural gas prices as the majority of our costs are in Canadian dollars.
Hedging Program
Considering the uncertainty over economic conditions and the variations of supply and demand balances, Fortress has undertaken the following forward sale transactions to provide better certainty of cash flow through to March 2010.
In fourth quarter of 2007 the Fortress made a decision to sell forward 5,000 GJ/d being 60% of its production at the equivalent price of $7.16 per mcf until October 30, 2008. This has resulted in an average realized price of $7.69 per mcf compared to an average reference spot price of $8.51 per mcf over the nine months ended September 30, 2008. During the third quarter of 2008, Fortress sold forward 5,000 GJ/d at the equivalent price of $9.44 per mcf from November 1, 2008 until March 31, 2009. Also during the third quarter of 2008, Fortress has sold forward 5,100 GJ/d at the equivalent price of $7.92 per mcf from April 1, 2009 until December 31, 2009. Recently the Company sold forward 2,600 GJ/d at the equivalent price of $9.22 per mcf from January 1, 2010 until March 31, 2010.
The effect of these transactions is that an estimated 55% of Fortress's production is sold forward at an average price of $8.41 per mcf until March 31, 2010.
08/09 Winter Capital Program
The Company remains dedicated to our capital budget philosophy, which is to fund capital programs based on available cash flow from operations. Most of the Fortress's operations are conducted during the winter months from December until mid to late March. Fortress's capital expenditures planned for the 2009/10 winter program will amount to approximately $8.5 million which is expected to be in line with the expected 2009 cash flow.
Development Activity - Square Creek and Ladyfern
Fortress will be pursuing two additional development wells to further delineate the Square Creek Bluesky and Notikewin pools. One of the locations will be drilled and completed as a dual zone, optimizing production and reducing capital deployed. Fortress is working with the owner of the Clear Prairie facility to debottleneck the facility and associated infrastructure, thereby allowing an increase in net production from the current rate of 466 boe per day to 650 boe per day and accommodating additional gas volumes expected from the 2008/2009 winter capital program.
Fortress has over 50 development locations on it properties in the Ladyfern area in which it owns between 60% and 100% working interest. The Company is planning on pursuing a number of development drilling locations as part of the 08/09 winter capital program.
Exploration Activity - Square Creek, Clear Prairie and Pine Creek
During the winter 07/08, Fortress constructed a 41 km pipeline and natural gas processing facility to service the Square Creek area along which the Company owns approximately 40,000 net acres of undeveloped land. Fortress has identified a two new multi zone drilling prospects on it lands from 2D it had acquired and 3D seismic it has access to. One well will be drilled prior to year end offsetting the existing Square Creek Blue Sky and Notikewin pools currently producing 5.8mmcf/d. An additional well will be drilled prior to February 15, 2009 targeting Bluesky, Charlie Lake and Notikewin formations. If either of these wells is successful, it will lead to further multi-well development activity in future years.
Fortress will commence drilling a high-impact exploration well in the Pine Creek area on its 100% owned lands in late November 2008. The drilling location is offsetting a well currently producing 5.0 mmcf/d. If successful, this well can be placed on stream in the first quarter of 2009.
Balance Sheet
Fortress ends the quarter with a net debt of $18.0 million and a line of credit from the Alberta Treasure Branches of $25 million. The Company has no requirements to raise additional financing, despite an aggressive 2008/09 capital spending program being undertaken. In September 2008, the Company re-filed its income tax returns for the 1997 to 1999 tax years to claim additional scientific research and experimental development ("SR&ED") credits related to the bio-technology business of its predecessor company. These additional claims could result a refund of approximately $3.4 million to the Company. The Company has not recorded this refund at September 30, 2008.
Operating Costs
Fortress has experience a significant increase in third party charges related to field activities and as a consequence unit operating costs have increased to $14.48/boe for the nine months ended September 30, 2008 compared to $9.21/boe for the nine months ended September 30, 2007. During the third quarter of 2008, Fortress has undertaken a program to reduce operating costs and have acquired rental equipment and will be increasing volumes at Square Creek which will have the effect of allocating the fixed portion of operating costs over a larger volume of production thereby reducing per unit operating costs. The impact of these changes will not be seen until the fourth quarter of 2008 and the first quarter of 2009.
Mr. Bailey said .... "we continue to make progress towards growing production and developing a profitable business even with the uncertainty that surrounds the general market. The forward sale arrangements that are in place through to March 2010 will provide certainty of cash flow and allow us to continue to grow by developing our projects."
Investor Conference Call
Fortress would like to invite interested investors and shareholders to take part in a conference call scheduled for 3:00pm MST (5:00pm EST) Wednesday, November 19th, 2008. To access the call, please dial 416-695-9757 or 866-542-4270 and mention the name Fortress.
Replay of Conference Call
Fortress will also host a replay of the investor call which will be available for a week following the call. For those who are unable to dial in to the scheduled call, the number and passcode below will allow a replay of the call at any time before 11:59 November 27, 2008.
Dial-in number(s): 416-695-5800 / 800-408-3053 Passcode: 3275498
Prompts: Name, Company and Phone Number
FINANCIAL AND OPERATING SUMMARY ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended September 30, 2008 September 30, 2007 ($000's) $/boe ($000's) $/boe ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Petroleum and natural gas sales 6,591 48.44 2,893 30.67 Realized gain (loss) on commodity contracts (1,047) (7.70) 261 2.77 ---------------------------------------------------------------------------- 5,544 40.74 3,154 33.44 Royalties (1,158) (8.51) (380) (4.03) Operating costs (2,139) (15.72) (973) (10.31) ---------------------------------------------------------------------------- Operating netback (1) 2,247 16.51 1,801 19.10 General and administrative expenses (693) (5.09) (848) (8.99) Net interest expense (361) (2.65) (448) (4.75) ---------------------------------------------------------------------------- Funds from operations (1) 1,193 8.77 505 5.36 Unrealized gain (loss) on commodity contracts 4,323 31.77 (35) (0.37) Depletion, depreciation and accretion (3,805) (27.97) (2,536) (26.87) Stock-based compensation expense (77) (0.57) (150) (1.59) Gain (loss) on sale of pipeline asset 124 0.91 - - ---------------------------------------------------------------------------- Income (loss) before income taxes 1,758 12.91 (2,216) (23.47) Future income tax recovery (expense) (688) (5.06) 613 6.50 ---------------------------------------------------------------------------- Net income (loss) 1,070 7.85 (1,603) (16.97) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Sales volume (boe/d) 1,478 1,025 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Nine months ended September 30, 2008 September 30, 2007 ($000's) $/boe ($000's) $/boe ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Petroleum and natural gas sales 20,195 52.55 9,499 38.61 Realized gain (loss) on commodity contracts (2,232) (5.81) 358 1.44 ---------------------------------------------------------------------------- 17,963 46.74 9,857 40.05 Royalties (3,421) (8.90) (1,371) (5.57) Operating costs (5,565) (14.48) (2,268) (9.21) ---------------------------------------------------------------------------- Operating netback (1) 8,977 23.36 6,218 25.27 General and administrative expenses (2,084) (5.42) (2,583) (10.50) Net interest expenses (1,049) (2.73) (425) (1.73) ---------------------------------------------------------------------------- Funds from operations (1) 5,844 15.21 3,210 13.04 Unrealized gain (loss) on commodity contracts 1,333 3.47 73 0.30 Depletion, depreciation and accretion (10,627) (27.65) (6,585) (26.75) Stock-based compensation expense (149) (0.39) (429) (1.74) Gain (loss) on sale of pipeline asset (428) (1.11) - - ---------------------------------------------------------------------------- Income (loss) before income taxes (4,027) (10.47) (3,731) (15.15) Future income tax recovery (expense) 898 2.34 1,203 4.89 ---------------------------------------------------------------------------- Net income (loss) (3,129) (8.13) (2,528) (10.26) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Sales volume (boe/d) 1,403 901 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- (1) Non-GAAP measures. See discussion in the following MD&A.
MANAGEMENT'S DISCUSSION AND ANALYSIS
November 14, 2008
Management's discussion and analysis ("MD&A") should be read in conjunction with the unaudited interim financial statements of Fortress Energy Inc. ("Fortress" or the "Company") as at and for the three and nine months ended September 30, 2008 and the audited consolidated financial statements of Fortress Energy Inc. for the year ended December 31, 2007. The interim financial statements have been prepared in accordance with Canadian Generally Accepted Accounting Principles ("GAAP"). All tabular amounts in the following discussion are in thousands of Canadian dollars unless otherwise noted. Additional information is available on the Company's web site at http://www.fortressenergy.ca/ or under the Company's profile at http://www.sedar.com/.
This MD&A provides management's analysis of Fortress' historical financial and operating performance based on information currently available. Actual results will vary from estimates and variances may be significant. Historical results are not indicative of future performance.
Non-GAAP Measurements
The terms "funds from operations" and "operating netback" used in this MD&A are not recognized measures under GAAP. Management believes that in addition to net income, funds from operations and operating netback are useful supplemental measures as they provide an indication of the results generated by the Company's principal business activities before the consideration of how those activities are financed. Investors are cautioned, however, that these measures should not be construed as alternatives to net income determined in accordance with GAAP, as an indication of the Company's performance.
The Company's method of calculating funds from operations may differ from that of other companies, and, accordingly it may not be comparable to measures used by other companies. The Company calculates funds from operations by taking cash flow from operating activities as determined under GAAP before changes in non-cash operating working capital and abandonment expenditures. The statements of cash flows included in the financial statements present the reconciliation between net income (loss) and funds from operations. A summary of this reconciliation is as follows:
---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ($000's) Three months ended Nine months ended September September September September 30, 2008 30, 2007 30, 2008 30, 2007 ---------------------------------------------------------------------------- Cash provided by (used in) operating activities 1,315 (879) 9,893 2,905 Change in non-cash operating working capital (122) 1,384 (4,130) 305 Abandonment expenditures - - 81 - ---------------------------------------------------------------------------- Funds from operations 1,193 505 5,844 3,210 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
Funds from operations per share is calculated using the weighted average basic and diluted shares used to calculate earnings per share.
Operating netback is calculated as the average unit sales price less royalties, realized gain (loss) on commodity contracts, and operating expenses. Operating netback represents the cash margin for every barrel of oil equivalent and is a common benchmark used in the oil and gas industry. There is no GAAP measure that is reasonably comparable to operating netback.
BOE Presentation
Natural gas reserves and volumes recorded in thousand cubic feet are converted to barrels of oil equivalent ("boe") on the basis of six thousand cubic feet ("mcf") of gas to one barrel ("bbl") of oil. The term "barrels of oil equivalent" may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf to 1 bbl is based on an energy equivalent conversion method primarily applicable at the burner tip and does not represent a value equivalent at the wellhead.
Forward Looking Statements
Statements in this MD&A may contain forward looking information including expectations of future production, components of cash flow and earnings, expected future events and/or financial results that are forward looking in nature and subject to substantial risks and uncertainties. Without limiting the generality of the foregoing, the Company has made materially forward looking statements:
(i) under the heading "Corporate Highlights" and "Share Capital" regarding the use of proceeds of the equity financing for the 2009 capital program and working capital requirements;
(ii) Under the heading "Corporate Highlights" regarding the Pine Creek exploration well and anticipated timing of production; and
(iii) Under the heading "Production" regarding the anticipated resolution of plant capacity issues.
The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. The Company cautions the readers that actual performance will be affected by a number of factors, as many may respond to changes in economic and political circumstances throughout the world. Events or circumstances may cause actual results to differ materially from those predicted, a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the Company. These risks include, but are not limited to: the risks associated with the oil and gas industry, commodity prices and exchange rate changes; industry related risks could include, but are not limited to, operational risks in exploration, development and production (applicable to the forward looking statements (i) through (iii) above), delays or changes in plans (applicable to the forward looking statements identified in (i) through (iii) above); risks associated with the uncertainty of reserve estimates, health and safety risks and the uncertainty of estimates and projections of production, costs and expenses. These external factors beyond the Company's control may affect the marketability of oil and natural gas produced, industry conditions including changes in laws and regulations, changes in income tax regulations, increased competition, fluctuations in commodity prices, interest rates, and variations in the Canadian/United States dollar exchange rate. The reader is cautioned not to place undue reliance on this forward looking information.
Statements throughout this MD&A that are not historical facts may be considered "forward looking statements." These forward looking statements sometimes include words to the effect that management believes or expects a stated condition or result. All estimates and statements that describe the Company's objectives, goals or future plans are forward looking statements. Since forward looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to any number of risks including, but not limited to:
(i) Risks associated with the oil and gas industry and regulatory bodies (e.g. operational risks in exploration, development and production, or changes in royalty rates);
(ii) Delays or changes in plans with respect to exploration or development projects or capital expenditures;
(iii) Uncertainty of estimates and projections relating to recoverable reserves, costs and expenses;
(iv) Health, safety and environmental risks; and
(v) Commodity price and exchange rate fluctuations.
In making its forward looking statements, the Company used among other things, the following material factors or assumptions: the 2009 capital program will proceed as anticipated, drilling will result in a commercial discovery and that parties can reach agreement as to expansion of plant capacity.
Forward looking statements contained herein are made as of the date hereof subject to the requirements of applicable securities legislation and except as otherwise required by law, the Company assumes no obligation to update any forward looking statements, whether as a result of new information, future events or results or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, the reader is cautioned not to place undue reliance on forward looking statements.
DESCRIPTION OF THE BUSINESS
Fortress' primary focus is the exploration and development of natural gas reserves in Western Canada. The Company has approximately 93,000 net acres of undeveloped land in the Ladyfern, Velma and Buick Creek areas in NE British Columbia and the Chigwell, Bashaw, Square Creek, Halverson, Mearon and Dahl areas of Alberta.
The Company's strategy is to 'acquire and exploit' properties that are early in their development cycle that offer exploration, appraisal and development drilling opportunities, while maintaining low finding and development costs. Fortress operates most of its production enabling it to have complete control over cost management of its capital programs.
CORPORATE HIGHLIGHTS
The results for the three months ended September 30, 2008 are as follows:
- The Company completed the third closing of a $16.5 million ($14.7 million net of issuance costs) equity financing that was announced in May. The proceeds will be used to fund the Company's 2009 capital program and working capital requirements.
- Fortress announced plans to purchase certain of its common shares by way of a normal course issuer bid through the facilities of the Toronto Stock Exchange (the "TSX"). Fortress may purchase up to a maximum of 1,351,014 common shares, which represents approximately 5% of its current issued and outstanding common shares, during the twelve month term of the issuer bid. As of November 14, 2008, the Company has acquired 45,000 shares at an average price of $0.41 per share.
- Fortress will commence drilling a high-impact exploration well in the Pine Creek area on its 100% owned lands in late November 2008. The drilling location is offsetting a well currently producing 5.0 mmcf/d. If successful, this well will be placed on production in the first quarter of 2009.
DETAILED FINANCIAL ANALYSIS Production ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended Nine months ended September September September September 30, 2008 30, 2007 30, 2008 30, 2007 ---------------------------------------------------------------------------- Sales volume: Natural gas (mcf/d) 8,733 6,111 8,272 5,302 Oil and NGL's (bbl/d) 23 7 24 17 Total(boe/d) 1,478 1,025 1,403 901 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
Sales volumes for the three months ended September 30, 2008 were 1,478 boe/d compared to 1,025 boe/d for the three months ended September 30, 2007 - an increase of 453 boe/d or 44%. This increase is due to an asset acquisition in the Ladyfern, Mearon and Velma areas in July 2007, the start up of two wells at Velma in late August 2007, and the start up of 5 wells (2.5 net) at Square Creek in late March 2008. The anticipated sales volume on the start up of the Square Creek area was approximately 540 boe/d compared to an actual sales volume for the third quarter of 448 boe/d - an increase of 49 boe/d from the prior quarter. Capacity constraints at the Clear Prairie facility that processes gas from the Square Creek area have resulted in the Company producing the Square Creek area at much lower rates than anticipated. Two wells remain shut-in and others are flowing at reduced rates while the Company works with the third party plant operator to resolve the capacity issues which are currently expected to be resolved in the first quarter of 2009. The Velma wells are tied into the Ladyfern gathering system and the start-up of these wells increased the line pressures and reduced production volumes at Ladyfern resulting in the need for added compression. In the first quarter of 2008 the Company added compression to restore lost production; however, mechanical issues have resulted in substantial down time and with no significant production gains from this area. These compressor issues are on-going and the Company is continuing to work with the manufacturer to resolve the issues.
Sales volumes for the nine months ended September 30, 2008 were 1,403 boe/d compared to 901 boe/d for the nine months ended September 30, 2007. This increase is due to the asset acquisition in July 2007 and the start up of wells in the Velma and Square Creek areas.
Revenue ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended Nine months ended September September September September 30, 2008 30, 2007 30, 2008 30, 2007 ---------------------------------------------------------------------------- Petroleum and natural gas sales ($000's) 6,591 2,893 20,195 9,499 ---------------------------------------------------------------------------- Average realized prices: Natural gas ($/mcf) 7.99 5.07 8.66 6.36 Realized gain (loss) on commodity contracts ($/mcf) (1.28) 0.46 (0.97) 0.24 ---------------------------------------------------------------------------- Realized natural gas price ($/mcf) 6.71 5.53 7.69 6.60 Oil and NGLs ($/bbl) 82.29 71.42 86.35 65.29 ---------------------------------------------------------------------------- Total ($/boe) 40.74 33.44 46.74 40.05 ---------------------------------------------------------------------------- Benchmark prices: AECO average price ($/mcf) 7.76 5.12 8.51 6.56 Edmonton par ($/boe) 123.08 80.70 115.95 73.72 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
Petroleum and natural gas sales for the three months ended September 30, 2008 were $6,591,000 compared to $2,893,000 for three months ended September 30, 2007. This increase is attributable to a 44% increase in sales volumes and a 22% increase in the price of natural gas realized by the Company.
Petroleum and natural gas sales for the nine months ended September 30, 2008 were $20,195,000 compared to $9,499,000 for the nine months ended September 30, 2007. This increase is due to a 56% increase in sales volumes and 17% increase in sales prices realized in the nine months ended September 30, 2008 compared to the nine months ended September 30, 2007.
The average natural gas price realized by the Company for the third quarter of 2008 was $7.99/mcf (net of transportation costs and before realized losses on commodity contracts) compared to the AECO average price of $7.76/mcf. This compares to the average natural gas price realized in the third quarter of 2007 of $5.07/mcf (net of transportation costs and before realized gains on commodity contracts) and an AECO average price of $5.12/mcf. For the nine months ended September 30, 2008, the Company realized an average price for natural gas of $8.66/mcf (net of transportation costs and before realized losses on commodity contracts) compared to an average AECO price of $8.51/mcf. For the nine months ended September 30, 2007, the Company realized an average natural gas price of $6.36/mcf (net of transportation costs and before realized gains on commodity contracts) compared to an AECO average price of $6.56/mcf.
The Company's current production is approximately 99% natural gas and revenues are reliant on North American natural gas prices. Natural gas prices increased in the second quarter based on bullish sentiment including lower than expected LNG (liquefied natural gas) imports to the United States, lower Canadian production, and an extended outage at the Independence Hub in the Gulf of Mexico resulting in a decline in storage levels. Sentiment changed in July and natural gas prices declined from a high of more than $12/mcf based on fears of a global credit crunch and U.S. recession resulting in reduced demand for natural gas.
The Company uses commodity contracts to manage its exposure to fluctuations in the price of natural gas. In the third quarter of 2008, the Company realized a loss on commodity contracts of $1,047,000, or $1.28/mcf, and recorded an unrealized gain on commodity contracts of $4,323,000. For the nine months ended September 30, 2008, the Company realized a loss on commodity contracts of $2,232,000, or $0.97/mcf, and an unrealized gain on commodity contracts of $1,333,000. Approximately 54% of the Company's current production is under contract. Contracts in place as of September 30, 2008 are as follows:
---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Type Period Volume (GJ/d) Fixed Price ($/GJ) ---------------------------------------------------------------------------- Swap January 1, 2008 to October 31, 2008 2,000 6.51 Swap January 1, 2008 to October 31, 2008 3,000 6.505 Swap November 1, 2008 to March 31, 2009 1,250 9.58 Swap November 1, 2008 to March 31, 2009 3,750 8.25 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Royalties ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended Nine months ended September September September September 30, 2008 30, 2007 30, 2008 30, 2007 ---------------------------------------------------------------------------- Royalties ($000's) 1,158 380 3,421 1,371 $/boe 8.51 4.03 8.90 5.57 Percentage of petroleum and natural gas sales 17.6 12.0 16.9 13.9 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
Royalties were $1,158,000 for the three months ended September 30, 2008 compared to $380,000 for the three months ended September 30, 2007. This increase reflects increased volumes and natural gas prices, as noted previously. As a percentage of petroleum and natural gas sales (net of transportation costs and before realized gains/losses on commodity contracts), royalties increased to 17.6% in the third quarter of 2008 compared to 12.0% in the third quarter of 2007. This increase is attributed to increased production volumes from the Company's Velma, Mearon and Square Creek properties which record average royalty rates of 20% to 25%. The Company's wells at Ladyfern qualify for the Ultra-Marginal Royalty Program which assesses a reduced royalty rate for low producing wells in the province of British Columbia, resulting in an effective royalty rate of approximately 8% for these wells.
For the nine months ended September 30, 2008, the Company recorded royalties of $3,421,000 compared to $1,371,000 for the nine months ended September 30, 2007. As a percentage of petroleum and natural gas sales (net of transportation costs and before realized gains/losses on commodity contracts), royalties for the first nine months of 2008 were 16.9% compared to 13.9% for the comparable period in 2007. This increase is due to the change in property mix resulting from the asset acquisition in July 2007 and wells brought onto production since that time which have higher royalty rates than the average royalty rate realized by the Company.
Operating Expenses ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended Nine months ended September September September September 30, 2008 30, 2007 30, 2008 30, 2007 ---------------------------------------------------------------------------- Operating expenses ($000's) 2,139 973 5,565 2,268 $/boe 15.72 10.31 14.48 9.21 ---------------------------------------------------------------------------- Operating expenses ($000's) - adjusted for charges related to prior periods 2,031 973 5,457 2,268 $/boe 14.93 10.31 14.20 9.21 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
Operating expenses increased in the three months ended September 30, 2008 to $2,139,000 from $973,000 in the third quarter of 2007. This increase is due to higher operating costs being experienced across all fields with the most significant increase from the Square Creek area which recorded operating expenses of approximately $16.41/boe in the third quarter due to higher than anticipated third party plant operating expenses and plant capacity constraints that resulted in lower production levels. In addition, the Company incurred additional compression and processing charges related to its Bashaw field that related to prior periods but were invoiced to Fortress in the third quarter of 2008 and which amounted to $108,000, or $0.79/boe, for the three months ending September 30, 2008.
For the nine months ended September 30, 2008 operating expenses were $5,565,000 compared to $2,268,000 for the nine months ended September 30, 2007. One a per boe basis, operating expenses were $14.48/boe for the nine months ended September 30, 2008 compared to $9.21/boe for the nine months ended September 30, 2007. The largest factors affecting operating expenses are gas processing fees, contract operating fees, chemicals and equipment rentals which account for approximately 75% of the Company's operating expenses.
The Company is taking steps to reduce its operating expenses. On November 1, 2008, the Company acquired the compressor that it had been renting at Square Creek. The Company is also in discussions to acquire other rental equipment to reduce its operating expenses.
General and Administrative Expenses ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended Nine months ended September 30, September 30, 2008 2007 2008 2007 ---------------------------------------------------------------------------- Gross ($000's) 1,027 1,167 3,056 3,605 Partner recoveries ($000's) (112) - (350) - Capitalized ($000's) (222) (319) (622) (1,022) ---------------------------------------------------------------------------- Net ($000's) 693 848 2,084 2,583 $/boe 5.09 8.99 5.42 10.50 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
Net general and administrative expenses decreased to $693,000 in the third quarter of 2008 from $848,000 in the third quarter of 2007. Gross general and administrative expenses for the third quarter of 2008 reflect a 12% decrease from the third quarter of 2007 which is mainly attributable to a reduction in consulting fees charged to the Company.
Net general and administrative expenses decreased to $2,084,000 for the nine months ended September 30, 2008 from $2,583,000 for the nine months ended September 30, 2007. General and administrative expenses for the nine months ended September 30, 2008 were $5.42/boe compared to $10.50/boe for the nine months ended September 30, 2007. The decrease on a per boe basis is mainly due to an increase in production volumes in 2008 and reduced reliance on the use of consultants.
Partner recoveries reflect the portion of the Company's general and administrative expenses recoverable from partners related to the Company's capital program.
The Company's policy is to capitalize salaries, stock-based compensation, consulting fees and software costs that are directly attributable to exploration and development activities.
Stock-based Compensation Expense ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended Nine months ended September 30, September 30, 2008 2007 2008 2007 ---------------------------------------------------------------------------- Stock-based compensation expense ($000's): Stock options 93 150 125 429 Restricted stock units 35 - 155 - ---------------------------------------------------------------------------- 128 150 280 429 Stock-based compensation capitalized to property, plant and equipment (51) - (131) - ---------------------------------------------------------------------------- Net stock-based compensation expense 77 150 149 429 ---------------------------------------------------------------------------- $/boe 0.57 1.59 0.39 1.74 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
The net stock-based compensation expense for the three months ended September 30, 2008 was $77,000 compared to $150,000 for the three months ended September 30, 2007. The gross stock-based compensation for the three months ended September 30, 2008 was $128,000 of which $93,000 was attributable to stock options and $35,000 to restricted stock units. This compares to $150,000 for the three months ended September 30, 2007 which was attributable to stock options granted in January 2007 that were later cancelled in November 2007. For the three and nine months ended September 30, 2008, the Company capitalized stock-based compensation of $51,000 and $131,000, respectively, directly related to exploration and development activities (three and nine months ended September 30, 2007 - $nil).
The net stock-based compensation expense for the nine months ended September 30, 2008 was $149,000, a decrease of $280,000 from the nine month period ended September 30, 2007. In the nine months ended September 30, 2008, a total of 1,684,633 stock options and 500,000 restricted stock units were granted.
Interest Income and Expense
The Company recorded interest expense of $361,000 for the three months ended September 30, 2008 compared to $448,000 for the three months ended September 30, 2007. The Company recorded interest expense of 1,049,000 for the nine months ended September 30, 2008 compared to net interest expense in the nine months ended September 30, 2007 of $425,000. Interest expense in the first nine months of 2008 reflects interest on the Company's revolving credit facility and interest on unspent flow-through obligations. Net interest income for the nine months ended September 30, 2007 reflects interest earned on commercial paper investments prior to the reorganization of SignalEnergy Inc.
Depletion, Depreciation and Accretion Expense ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended Nine months ended September 30, September 30, 2008 2007 2008 2007 ---------------------------------------------------------------------------- Depletion and depreciation expense ($000's) 3,761 2,504 10,508 6,503 Accretion of asset retirement obligations ($000's) 44 32 119 82 ---------------------------------------------------------------------------- Total ($000's) 3,805 2,536 10,627 6,585 ---------------------------------------------------------------------------- Depletion and depreciation expense ($/boe) 27.65 26.54 27.34 26.42 Accretion of asset retirement obligations ($/boe) 0.32 0.33 0.31 0.33 ---------------------------------------------------------------------------- Total ($/boe) 27.97 26.87 27.65 26.75 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
Depletion and depreciation are calculated based on capital expenditures, production rates, and reserves. Depletion and depreciation expense was $3,761,000 for three months ended September 30, 2008 compared to $2,504,000 for the three months ended September 30, 2007. This increase is attributable to increased production volumes in the third quarter of 2008, which have increased 44% from the third quarter of 2007. The depletion and depreciation expense rate for the third quarter of 2008 was $27.65/boe compared to $26.54/boe for the third quarter of 2007. For the nine months ended September 30, 2008, the Company recorded depletion and depreciation expense of $10,508,000 compared to $6,503,000 for the nine months ended September 30, 2007.
Estimated future development costs for proved undeveloped properties included in the calculation of depletion expense at September 30, 2008 decreased to $15,842,000 from $28,600,000 at September 30, 2007. Undeveloped land costs at September 30, 2008 increased to $8,508,000 from $7,371,000 at September 30, 2007 and were excluded from assets subject to depletion. Undeveloped land costs increased with the acquisition of Crown lands at Pine Creek in the third quarter of 2008.
Accretion expense for the three months ended September 30, 2008 was $44,000 compared to $32,000 for the three months ended September 30, 2007. This increase is due to the asset acquisition in the Ladyfern, Mearon and Velma areas in July 2007 and additional wells brought onto production in the first quarter of 2008. For the nine months ended September 30, 2008 the Company recorded accretion expense of $119,000 compared to $82,000 for the nine months ended September 30, 2007. The Company completed the construction of a refrigeration plant and sweetening facilities in the second and third quarters of 2007 and acquired a partners working interest in the Ladyfern North, Mearon North and Velma areas in July 2007, significantly increasing the Company's asset retirement obligation. In addition, the Company added 5 wells (2.5 net) in the first quarter of 2008 including production and gathering facilities at Square Creek which have increased the asset retirement obligation.
Income Tax
The Company recorded a future income tax expense for the three months ended September 30, 2008 of $688,000 compared to a recovery of future income taxes of $613,000 for the three months ended September 30, 2007. For the nine months ended September 30, 2008, the Company recorded a recovery of future income taxes of $898,000 compared to $1,203,000 for the first nine months of 2007. Future income tax reflects the difference between the underlying tax value and carrying value of the Company's assets and liabilities. The change in future income taxes reflects capital costs incurred since the third quarter of 2007. Based on current commodity prices and planned capital expenditures, the Company does not expect to be cash taxable in 2008.
The income tax effect of a $5 million flow-through share offering completed in December 2007 was recorded in the first quarter of 2008 with the filing of the renouncement documents to the taxation authorities. The effective date of the renouncement was December 31, 2007 with all expenditures to be incurred by December 31, 2008. As of September 30, 2008, the Company has incurred approximately $1 million of eligible expenditures.
The estimated tax pools of the Company at September 30, 2008 are as follows:
---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ($000's) ---------------------------------------------------------------------------- Canadian Oil and Gas Property Expenses 16,406 Canadian Development Expenses 34,009 Canadian Exploration Expenses 11,383 Undepreciated Capital Cost 30,281 Share Issuance Costs 2,083 Investment Tax Credits 2,367 ---------------------------------------------------------------------------- 96,529 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Net Income (Loss) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended Nine months ended ($000's except per share and per boe September 30, September 30, amounts) 2008 2007 2008 2007 ---------------------------------------------------------------------------- Net income (loss) 1,070 (1,603) (3,129) (2,528) Net income (loss) per share - basic and diluted 0.04 (0.12) (0.16) (0.19) Net income (loss) per boe 7.85 (16.97) (8.13) (10.26) ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
The Company recorded net income of $1,070,000 for the three months ended September 30, 2008 compared to a net loss of $1,603,000 for the three months ended September 30, 2007. This translates into a basic and diluted net income per share of $0.04 for the three months ended September 30, 2008 compared to a basic and diluted net loss per share of $0.12 for the three months ended September 30, 2007. The change in net income in the three months ended September 30, 2008 is attributable to a net gain on commodity contracts of $3,276,000.
The net loss for the nine months ended September 30, 2008 was $3,129,000 compared to $2,528,000 for the nine months ended September 30, 2007. For the nine months ended September 30, 2008, the Company recorded a net loss on commodity contracts of 899,000 and a loss on the sale of a pipeline asset of $428,000.
Funds from Operations ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ($000's except share and per boe Three months ended Nine months ended amounts) September 30, September 30, 2008 2007 2008 2007 ---------------------------------------------------------------------------- Funds from operations 1,193 505 5,844 3,210 Funds from operations ($/boe) 8.77 5.36 15.21 13.04 Funds from operations per share - basic and diluted 0.04 0.04 0.29 0.24 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
Funds from operations for third quarter of 2008 were $1,193,000 compared to $505,000 for the third quarter of 2007. This increase is attributed to increased production volumes and realized prices. The operating netback realized by the Company for the three months ended September 30, 2008 decreased from $19.10/boe in the third quarter of 2007 to $16.51/boe due to an increase in realized losses on commodity contracts.
Funds from operations for the nine months ended September 30, 2008 increased to $5,844,000 from $3,210,000 for the nine months ended September 30, 2007. The increase is due to increased production and prices realized by the Company. The Company's operating netback for the nine months ended September 30, 2008 decreased by $1.91/boe compared to the nine months ended September 30, 2007 mainly due to an increase in operating expenses.
Capital Expenditures ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended Nine months ended September 30, September 30, ($000's) 2008 2007 2008 2007 ---------------------------------------------------------------------------- Land and seismic 1,578 117 2,161 194 Drilling and completions 48 553 5,089 10,126 Equipment and facilities (194) 4,813 15,801 9,107 Capitalized overhead costs 273 319 753 1,022 Abandonment expenditures - - 81 - Other 32 - 65 1,166 Acquisitions - 12,586 - 12,943 Dispositions - - (8,150) - ---------------------------------------------------------------------------- 1,737 18,388 15,800 34,558 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
The total capital expenditures for the three months ended September 30, 2008 were $1,737,000 compared to additions of $18,388,000 for the three months ended September 30, 2007. The most significant additions in the three months ended September 30, 2008 were the acquisition of the Pine Creek lands and trade seismic data over the Company's Halverson lands. In the third quarter of 2007 the Company completed an asset acquisition in the Ladyfern, Mearon and Velma areas for proceeds of $12,535,000, completed the construction of a refrigeration unit at Ladyfern and an 11 km pipeline at Velma to tie two wells to production facilities. The total capital expenditures for the nine months ended September 30, 2008 were $15,800,000 (net of dispositions) compared to $34,588,000 for the nine months ended September 30, 2007. The capital program for the first quarter of 2008 was focused on the follow-up to the discovery of the Bluesky and Notikewin gas pools from the 2007 winter drilling program and compression and optimization at Ladyfern. Fortress drilled two additional wells in the Bluesky formation and three wells in the Notikewin to better delineate the two structures. The Company also constructed a 10 mmcf/d gathering and production facility to service eight wells it has in the Square Creek area.
The Company completed the construction of a 41 km pipeline to deliver gas to the Clear Prairie gas plant to service the Square Creek area, the corridor along which it owns 41,800 net acres of land opening up a significant exploration area for the Company. The pipeline was completed and commissioned in March 2008 for a total cost of $8,578,000 and was sold to a mid-stream service provider in April for proceeds of $8,150,000 resulting in a loss on the sale of the pipeline asset of $428,000.
Share Capital ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended Nine months ended September 30, September 30, 2008 2007 2008 2007 ---------------------------------------------------------------------------- Weighted average common shares outstanding - basic 26,964,795 13,266,288 19,937,734 13,263,711 Weighted average common shares outstanding - diluted 27,004,567 13,266,288 19,937,734 13,263,711 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Outstanding securities ---------------------------------------------------------------------------- Common shares 27,020,288 Warrants 5,516,700 Stock options 2,081,635 ---------------------------------------------------------------------------- Total outstanding securities at September 30, 2008 34,618,623 Common shares acquired under normal course issuer bid (45,000) ---------------------------------------------------------------------------- Total outstanding securities at November 14, 2008 34,573,623 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
On December 21, 2007, the Company closed a public offering of 2,703,000 flow-through common shares at $1.85 per share for total gross proceeds of $5,000,550 ($4,395,000 net of share issuance costs). The full expenditure commitment was renounced to subscribers effective December 31, 2007 with all expenditures to be incurred by December 31, 2008. As of September 30, 2008, the Company has incurred eligible expenditures of approximately $1,000,000.
The Company closed a public offering of 11,033,400 units ("Units") on June 20, 2008, June 27, 2008 and July 4, 2008, for gross proceeds of $16,550,100 ($14,737,000 net of issuance costs). Each Unit consists of one common share of the Company and one-half of one common share purchase warrant. The warrants are exercisable on or before September 20, 2011 subject to the right of the Company to accelerate the expiry time on not less than 30 days notice to the warrant holders, if the aggregate sales price of the common shares during a period of 20 consecutive days divided by the aggregate number of common shares sold is at least $3.00. Each whole warrant entitles the holder to purchase one common share an at exercise price of $2.00. The proceeds of the financing will be used to fund the Company's 2009 capital program and working capital requirements.
Liquidity and Capital Resources
The Company has a $25,000,000 revolving, demand credit facility with its bank (the "Bank"), bearing interest at the Bank's prime lending rate plus 0.25% (effective interest rate for the three and nine months ended September 30, 2008 of 5.00% and 5.25% respectively, and for the three and nine months ended September 30, 2007 - 6.5%) and collateralized by an interest over all present and after acquired property of the Company. The authorized limit is subject to annual review and re-determination of the Company's borrowing base by the Bank. The Company has a $1,000,000 letter of credit which reduces its borrowing capacity on the revolving operating loan.
The credit facility has a covenant that requires the Company to maintain its working capital ratio at 1:1 or greater while the credit facility is outstanding. The working capital ratio is defined as current assets plus the unutilized portion of the credit facility divided by current liabilities less the balance drawn against the credit facility. The Company is in compliance with the working capital covenant at September 30, 2008.
Cash provided by operating activities was $1,315,000 for the third quarter of 2008 compared to cash used in operating activities of $879,000 for the third quarter of 2007. This increase is due to an increase in non-cash working capital balances and funds from operations in the three months ended September 30, 2008. Cash provided by operating activities for the nine months ended September 30, 2008 was $9,893,000 compared to $2,905,000 for the nine months ended September 30, 2007. This increase is due to increased funds from operations and changes in non-cash working capital balances. Funds from operations were $5,844,000 for the nine months ended September 30, 2008 compared to $3,210,000 for the nine months ended September 30, 2007.
Cash provided by financing activities for the three months ended September 30, 2008 was $3,363,000 compared to $17,630,000 for the three months ended September 30, 2007. On July 4, 2008, the Company completed the third closing of a $16,550,100 financing that was announced in May. The net proceeds received on the July 4 closing was $2,024,000. Cash provided by financing activities for the three months ended September 30, 2007 consisted of an increase in the Company's operating loan resulting from the asset acquisition completed in July 2007. Cash provided by financing activities for the nine months ended September 30, 2008 was $11,968,000 compared to cash used in financing activities for the nine months ended September 30, 2007 of $6,216,000. In the first quarter of 2007, the Company redeemed 23,076,923 common shares as part of its reorganization of Signal for $30,471,000 and in July secured a $24,000,000 bank operating loan.
Cash used in investing activities for the third quarter of 2008 was $4,680,000 compared to $16,758,000 for the third quarter of 2007. The Company's capital expenditures were $1,737,000 in the third quarter of 2008 compared to $18,388,000 in the third quarter of 2007. Cash used in investing activities for the nine months ended September 30, 2008 was $21,869,000 compared to $33,392,000 for the nine months ended September 30, 2007. In the second quarter of 2008, the Company recorded the sale of a 41 km pipeline connecting the Square Creek area to processing facilities for $8,150,000.
Related Party Transactions
(a) In the three and nine months ended September 30, 2008, the Company was charged $218,000 and $794,000 respectively (three and nine months ended September 30, 2007 - $81,000), in legal fees by a law firm where a director of the Company is a partner, of which $123,000 is included in accounts payable and accrued liabilities at September 30, 2008.
(b) In the three and nine months ended September 30, 2008, the Company was charged $25,000 (three and nine)
For full details for FEI
ISRAMCO, INC. Reports Third Quarter Results
HOUSTON, Nov 14, 2008 /PRNewswire-FirstCall via COMTEX/ -- ISRAMCO, INC. (ISRL) reported today that third quarter 2008 revenues were $17,866,000, compared to $5,355,000 in the third quarter of 2007, an increase of approximately 234%. Major components of revenues in the third quarter of 2008 were oil and gas sales of $17,855,000 compared to $5,877 in the third quarter of 2007. Revenues for the nine months ended September 30, 2008 were $44,469,000 compared to $15,692,000 during the comparable period in 2007.
The increase in oil and gas revenues is mainly attributable to the oil and gas properties that the Company purchased from GFB Acquisition - I, L.P. ("GFB") and Trans Republic Resources, Ltd. on March 27, 2008 and from Five States Energy Company, L.L.C. on March 2, 2007, and the increase in oil and gas prices. These increases were partially offset by the natural decline in production from our older oil and gas properties.
The Company reported a net income of $34,488,000 or $12.69 per share for the third quarter of 2008 compared to net loss of $647,000 or ($0.24) per share for the same period in 2007. The increase in the net income recorded during the three months ended September 30, 2008 as compared to the net loss recorded for the same period in 2007 is primarily attributable to an aggregate $53,336,000 increase in gain on swap transactions as well as the increase in operating income. This increase was partially offset by an $18,439,000 increase in interest expenses and an income tax benefit.
The Company reported a net loss of $5,346,000 or ($1.97) per share for the nine months ended September 30, 2008, compared to net loss of $1,215,000 or ($0.45) per share for the comparable nine month period in 2007. The increase in the loss recorded during the nine months ended September 30, 2008, as compared to the net loss recorded for the same period in 2007, is primarily attributable to an aggregate $17,220,000 increase in loss on swap transactions as well as the increase in interest expense. This was partially offset by a $15,007,000 increase in operating income and an income tax benefit.
The Company uses oil and gas swaps to hedge its future production. However, the Company does not apply hedge accounting. As a result, all the changes in the mark-to-market value of the derivatives per SFAS 133 are reflected as unrealized gain or loss in the statements of operations. Due to the increase in oil prices, the Company recorded a loss on derivative (hedging) contracts of $17,917,000 for the nine months ended September 30, 2008.
There are currently 2,717,691 shares of Common Stock issued and outstanding.
Isramco's unaudited quarterly results are summarized below (in thousands except for shares outstanding and per share amounts):
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2008 2007 2008 2007
STATEMENT OF OPERATIONS
DATA
Revenues $17,866 $5,355 $44,469 $15,692
Total operating
expenses 13,590 4,969 27,760 12,041
Operating income 4,276 386 16,709 3,651
Net income (loss) 34,488 (647) (5,346) (1,215)
Net income (loss)
per common share 12.69 (0.24) (1.97) (0.45)
CASH FLOW DATA
Net cash provided by
(used by) operating
activities 12,614 (178)
Net cash used in
investing activities (98,988) (65,587)
Net cash provided by
financing activities 91,377 67,264
September 30, December 31,
2008 2007
BALANCE SHEET DATA
Current assets $21,756 $11,103
Total assets 214,347 110,708
Current liabilities 37,630 11,273
Long - term liabilities 158,909 73,964
Total shareholders' equity 17,808 25,471
FORWARD-LOOKING STATEMENTS
ALL STATEMENTS CONTAINED HEREIN, AS WELL AS ORAL STATEMENTS THAT MAY BE MADE BY THE COMPANY OR BY OFFICERS, DIRECTORS OR EMPLOYEES OF THE COMPANY ACTING ON THE COMPANY'S BEHALF, THAT ARE NOT STATEMENTS OF HISTORICAL FACT, CONSTITUTE "FORWARD-LOOKING STATEMENTS" AND ARE MADE PURSUANT TO THE SAFE- HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT COULD CAUSE THE ACTUAL RESULTS OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM THE HISTORICAL RESULTS OR FROM ANY FUTURE RESULTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH RISKS AND UNCERTAINTIES ARE OUTLINED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR 2007, ITS QUARTERLY REPORTS ON FORM-10-Q, AND SUCH OTHER DOCUMENTS AS ARE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FROM TIME TO TIME. THE COMPANY IS NOT OBLIGATED TO REVISE OR UPDATE ANY FORWARD-LOOKING STATEMENTS IN ORDER TO REFLECT EVENTS OR CIRCUMSTANCES THAT MAY ARISE AFTER THE DATE OF THIS RELEASE.
SOURCE ISRAMCO, INC.
Copyright (C) 2008 PR Newswire. All rights reserved
The increase in oil and gas revenues is mainly attributable to the oil and gas properties that the Company purchased from GFB Acquisition - I, L.P. ("GFB") and Trans Republic Resources, Ltd. on March 27, 2008 and from Five States Energy Company, L.L.C. on March 2, 2007, and the increase in oil and gas prices. These increases were partially offset by the natural decline in production from our older oil and gas properties.
The Company reported a net income of $34,488,000 or $12.69 per share for the third quarter of 2008 compared to net loss of $647,000 or ($0.24) per share for the same period in 2007. The increase in the net income recorded during the three months ended September 30, 2008 as compared to the net loss recorded for the same period in 2007 is primarily attributable to an aggregate $53,336,000 increase in gain on swap transactions as well as the increase in operating income. This increase was partially offset by an $18,439,000 increase in interest expenses and an income tax benefit.
The Company reported a net loss of $5,346,000 or ($1.97) per share for the nine months ended September 30, 2008, compared to net loss of $1,215,000 or ($0.45) per share for the comparable nine month period in 2007. The increase in the loss recorded during the nine months ended September 30, 2008, as compared to the net loss recorded for the same period in 2007, is primarily attributable to an aggregate $17,220,000 increase in loss on swap transactions as well as the increase in interest expense. This was partially offset by a $15,007,000 increase in operating income and an income tax benefit.
The Company uses oil and gas swaps to hedge its future production. However, the Company does not apply hedge accounting. As a result, all the changes in the mark-to-market value of the derivatives per SFAS 133 are reflected as unrealized gain or loss in the statements of operations. Due to the increase in oil prices, the Company recorded a loss on derivative (hedging) contracts of $17,917,000 for the nine months ended September 30, 2008.
There are currently 2,717,691 shares of Common Stock issued and outstanding.
Isramco's unaudited quarterly results are summarized below (in thousands except for shares outstanding and per share amounts):
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2008 2007 2008 2007
STATEMENT OF OPERATIONS
DATA
Revenues $17,866 $5,355 $44,469 $15,692
Total operating
expenses 13,590 4,969 27,760 12,041
Operating income 4,276 386 16,709 3,651
Net income (loss) 34,488 (647) (5,346) (1,215)
Net income (loss)
per common share 12.69 (0.24) (1.97) (0.45)
CASH FLOW DATA
Net cash provided by
(used by) operating
activities 12,614 (178)
Net cash used in
investing activities (98,988) (65,587)
Net cash provided by
financing activities 91,377 67,264
September 30, December 31,
2008 2007
BALANCE SHEET DATA
Current assets $21,756 $11,103
Total assets 214,347 110,708
Current liabilities 37,630 11,273
Long - term liabilities 158,909 73,964
Total shareholders' equity 17,808 25,471
FORWARD-LOOKING STATEMENTS
ALL STATEMENTS CONTAINED HEREIN, AS WELL AS ORAL STATEMENTS THAT MAY BE MADE BY THE COMPANY OR BY OFFICERS, DIRECTORS OR EMPLOYEES OF THE COMPANY ACTING ON THE COMPANY'S BEHALF, THAT ARE NOT STATEMENTS OF HISTORICAL FACT, CONSTITUTE "FORWARD-LOOKING STATEMENTS" AND ARE MADE PURSUANT TO THE SAFE- HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT COULD CAUSE THE ACTUAL RESULTS OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM THE HISTORICAL RESULTS OR FROM ANY FUTURE RESULTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH RISKS AND UNCERTAINTIES ARE OUTLINED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR 2007, ITS QUARTERLY REPORTS ON FORM-10-Q, AND SUCH OTHER DOCUMENTS AS ARE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FROM TIME TO TIME. THE COMPANY IS NOT OBLIGATED TO REVISE OR UPDATE ANY FORWARD-LOOKING STATEMENTS IN ORDER TO REFLECT EVENTS OR CIRCUMSTANCES THAT MAY ARISE AFTER THE DATE OF THIS RELEASE.
SOURCE ISRAMCO, INC.
Copyright (C) 2008 PR Newswire. All rights reserved
Rancher Energy Corp. Announces Second Quarter Fiscal 2009 Financial Results
DENVER, CO, Nov 14, 2008 (MARKET WIRE via COMTEX) -- Rancher Energy Corp. (RNCH) today announced financial results for its second fiscal quarter ended September 30, 2008.
Second Quarter Summary
The Company reported a 100% increase in second quarter revenue, to $3.3 million from $1.7 million in the same quarter last year. Total revenue included oil & gas sales of $2.0 million, up from $1.7 million in the same quarter last year, and gains on derivative activities of $1.3 million. The Company had no derivative contracts in place for the second quarter of 2007. The increased oil & gas sales revenue was due to a higher average sales price of $109.79 per barrel in the second quarter versus $69.88 per barrel in the second quarter a year ago. Rancher Energy sold 18,179 barrels of oil -- its net interest -- in the second quarter, down from 23,622 barrels a year ago due to mechanical-related downtime on certain producing wells as well as normal, year-over-year production declines.
The Company recorded a $6.8 million, non-cash impairment charge in the second quarter, reflecting excess carrying costs of certain properties over the anticipated future realized value. With the exception of production taxes, which increased 21% to $243,000 in the second quarter, the Company reduced costs in all other expense categories. In particular, general and administrative expense declined by 37% to $960,000 from $1.5 million, reflecting year-over-year reductions in headcount, professional fees and other overhead expenses. Due to the $6.8 million, non-cash impairment, total operating expenses in the second quarter increased to $8.9 million from $2.9 million a year ago.
Other expense in the second quarter totaled $1.7 million versus $1.4 million in the corresponding quarter a year ago. Other expense primarily included amortization of deferred financing costs and interest expense on the GasRock note payable, which due date has been extended to April 30, 2009. Net loss for the second quarter, which included the $6.8 million, non-cash impairment charge, was $7.3 million, or $0.06 per basic and diluted share, versus a net loss of $2.6 million, or $0.02 per basic and diluted share, in the same quarter last year.
Rancher Energy closed the second quarter with cash and cash equivalents of $5.1 million versus $6.8 million at March 31, 2008, fiscal year end.
Six-Month Summary
Total revenue through six months ended September 30, 2008, increased to nearly $3.3 million from $3.0 million in the same period last year. Oil & gas sales of $3.9 million were partially offset by a $590,000 loss related to hedging activities required by the GasRock loan. Through six months the Company sold 34,262 barrels of oil at an average price of $113.68 versus 46,056 barrels of oil sold at an average price of $64.73 per barrel in the same period last year. Again, the decline in production was attributed to mechanical problems at certain producing wells.
Total operating expenses increased to $11.1 million from $6.6 million due to the $6.8 million, non-cash impairment charge incurred in the second quarter. Excluding the $6.8 million impairment charge, total operating expenses declined by $2.3 million, reflecting decreases in all expense categories except production taxes, which increased to $474,000 from $363,000 in the same period last year based on higher oil & gas sales revenue. General and administrative expense declined by more than 50% to $2.0 million from $4.1 million as the Company aggressively cut overhead expenses.
Total other expense in the six-month period was $3.4 million, up from $2.8 million in the same period last year. Interest expense increased to $747,000 from $113,000 in association with the GasRock note payable. The Company also incurred a $2.7 million charge for amortization of deferred financing costs and discount on note payable in the six-month period, up from $99,000 in the year-ago period. Conversely, in the year-ago six-month period the Company had $2.6 million in liquidated damages pursuant to a registration rights arrangement versus no expense in that category in the 2008 period. Net loss for the six-month period, including the $6.8 million impairment, was $11.2 million, or $0.10 per basic and diluted share, as compared with $6.4 million, or $0.06 per basic and diluted share, in the same period last year.
About Rancher Energy Corp.
Rancher Energy is an innovative oil & gas exploration & development company with a targeted strategy to reinvigorate older, historically productive oil fields in the hydrocarbon-rich Rocky Mountain region of the United States. Using waterflood injection and CO2 flooding, coupled with other leading edge hydrocarbon recovery techniques such as 3-D seismic data and directional drilling, Rancher Energy plans to extract proven in-place oil that remains behind in mature fields. Rising energy demand combined with advances in oil recovery have made this strategy profitable. Rancher Energy is taking advantage of this convergence by acquiring low risk, high quality, historically productive plays with under-exploited reserves and developing customized enhanced recovery strategies to maximize production.
Forward-Looking Statements
This press release includes forward-looking statements as determined by the U.S. Securities and Exchange Commission (the "SEC"). All statements, other than statements of historical facts, included in this press release that address activities, events, or developments that the Company believes or anticipates will or may occur in the future are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include the Company's ability to obtain financing to implement its plan, to construct pipeline and other infrastructure, and for other operational and working capital purposes, the uncertainty of recovery factors for the enhanced oil recovery projects, the volatility of oil prices, general economic and business conditions, and other factors over which the Company has little or no control. The Company does not intend (and is not obligated) to update publicly any forward-looking statements. The contents of this press release should be considered in conjunction with the warnings and cautionary statements contained in the Company's recent filings with the SEC.
Rancher Energy Corp.
Consolidated Statements of Operations
(unaudited)
Three months ended Six months ended
September 30, September 30,
2008 2007 2008 2007
------------ ------------ ------------ ------------
Revenues:
Oil & gas sales $ 1,995,901 $ 1,650,628 $ 3,894,869 $ 2,981,107
Gain (loss) on
derivative
activities, net 1,305,551 - (589,743) -
------------ ------------ ------------ ------------
Total revenues 3,301,452 1,650,628 3,305,126 2,981,107
Operating expenses:
Production taxes 243,366 201,182 473,649 362,651
Lease operating
expenses 549,441 691,429 1,172,863 1,279,661
Depreciation,
depletion and
amortization 301,708 368,724 577,549 700,256
Accretion expense 30,835 31,618 77,111 77,608
Impairment of
unproved
properties 6,800,000 - 6,800,000 -
Exploration expense - 89,668 9,602 130,829
General and
administrative
expense 959,777 1,513,100 2,008,154 4,053,091
------------ ------------ ------------ ------------
Total operating
expenses 8,885,127 2,895,721 11,118,928 6,604,096
------------ ------------ ------------ ------------
Loss from operations (5,583,675) (1,245,093) (7,813,802) (3,622,989)
------------ ------------ ------------ ------------
Other income (expense):
Liquidated damages
pursuant to
registration rights
arrangement - (1,268,283) - (2,645,393)
Amortization of
deferred financing
costs and discount
on note payable (1,366,527) (99,254) (2,675,702) (99,254)
Interest expense (375,399) (41,941) (746,694) (113,180)
Interest and other
income 8,737 25,541 19,318 73,865
------------ ------------ ------------ ------------
Total other
expense (1,733,189) (1,383,937) (3,403,078) (2,783,962)
------------ ------------ ------------ ------------
Net loss $ (7,316,864) $ (2,629,030) $(11,216,880) $ (6,406,951)
============ ============ ============ ============
Basic and diluted
net loss per share $ (0.06) $ (0.02) $ (0.10) $ (0.06)
============ ============ ============ ============
Basic and diluted
weighted average
shares outstanding 115,457,475 108,018,888 115,213,149 105,888,646
Rancher Energy Corp.
Consolidated Balance Sheets
(Unaudited)
September 30, March 31,
2008 2008
ASSETS ------------ ------------
Current Assets:
Cash and cash equivalents $ 5,141,371 $ 6,842,365
Accounts receivable and prepaid expenses 1,000,029 1,170,641
------------ ------------
Total current assets 6,141,400 8,013,006
Oil & gas properties, at cost
(successful efforts method):
Unproved 54,054,852 54,058,073
Proved 20,920,412 20,734,143
Less: Accumulated depletion, depreciation,
amortization and impairment (8,810,672) (1,531,619)
------------ ------------
Net oil & gas properties 66,164,592 73,260,597
Other assets:
Furniture and equipment, net of accumulated
depreciation of $288,107 and $204,420,
respectively 863,643 997,196
Other assets 903,630 1,300,382
------------ ------------
Total other assets 1,767,273 2,297,578
------------ ------------
Total assets $ 74,073,265 $ 83,571,181
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 1,229,472 $ 2,114,204
Accrued oil & gas property costs 250,000 250,000
Asset retirement obligation 360,638 337,685
Note payable, net of unamortized discount
of $366,123 and $2,527,550, respectively 11,873,877 9,712,450
Derivative liability 713,063 590,480
------------ ------------
Total current liabilities 14,427,050 13,004,819
Long-term liabilities:
Derivative liability 55,158 246,553
Asset retirement obligation 974,311 922,166
------------ ------------
Total long-term liabilities 1,029,469 1,168,719
Commitments and contingencies: - -
Stockholders' equity:
Common stock 1,162 1,150
Additional paid-in capital 92,226,152 91,790,181
Accumulated deficit (33,610,568) (22,393,688)
------------ ------------
Total stockholders' equity 58,616,746 69,397,643
------------ ------------
Total liabilities and stockholders' equity $ 74,073,265 $ 83,571,181
============ ============
Contacts:
John Works
Chief Executive Officer
Rancher Energy Corp.
303-629-1125
Jay Pfeiffer
Pfeiffer High Investor Relations, Inc.
303-393-7044
SOURCE: Rancher Energy
Copyright 2008 Market Wire, All rights reserved.
Second Quarter Summary
The Company reported a 100% increase in second quarter revenue, to $3.3 million from $1.7 million in the same quarter last year. Total revenue included oil & gas sales of $2.0 million, up from $1.7 million in the same quarter last year, and gains on derivative activities of $1.3 million. The Company had no derivative contracts in place for the second quarter of 2007. The increased oil & gas sales revenue was due to a higher average sales price of $109.79 per barrel in the second quarter versus $69.88 per barrel in the second quarter a year ago. Rancher Energy sold 18,179 barrels of oil -- its net interest -- in the second quarter, down from 23,622 barrels a year ago due to mechanical-related downtime on certain producing wells as well as normal, year-over-year production declines.
The Company recorded a $6.8 million, non-cash impairment charge in the second quarter, reflecting excess carrying costs of certain properties over the anticipated future realized value. With the exception of production taxes, which increased 21% to $243,000 in the second quarter, the Company reduced costs in all other expense categories. In particular, general and administrative expense declined by 37% to $960,000 from $1.5 million, reflecting year-over-year reductions in headcount, professional fees and other overhead expenses. Due to the $6.8 million, non-cash impairment, total operating expenses in the second quarter increased to $8.9 million from $2.9 million a year ago.
Other expense in the second quarter totaled $1.7 million versus $1.4 million in the corresponding quarter a year ago. Other expense primarily included amortization of deferred financing costs and interest expense on the GasRock note payable, which due date has been extended to April 30, 2009. Net loss for the second quarter, which included the $6.8 million, non-cash impairment charge, was $7.3 million, or $0.06 per basic and diluted share, versus a net loss of $2.6 million, or $0.02 per basic and diluted share, in the same quarter last year.
Rancher Energy closed the second quarter with cash and cash equivalents of $5.1 million versus $6.8 million at March 31, 2008, fiscal year end.
Six-Month Summary
Total revenue through six months ended September 30, 2008, increased to nearly $3.3 million from $3.0 million in the same period last year. Oil & gas sales of $3.9 million were partially offset by a $590,000 loss related to hedging activities required by the GasRock loan. Through six months the Company sold 34,262 barrels of oil at an average price of $113.68 versus 46,056 barrels of oil sold at an average price of $64.73 per barrel in the same period last year. Again, the decline in production was attributed to mechanical problems at certain producing wells.
Total operating expenses increased to $11.1 million from $6.6 million due to the $6.8 million, non-cash impairment charge incurred in the second quarter. Excluding the $6.8 million impairment charge, total operating expenses declined by $2.3 million, reflecting decreases in all expense categories except production taxes, which increased to $474,000 from $363,000 in the same period last year based on higher oil & gas sales revenue. General and administrative expense declined by more than 50% to $2.0 million from $4.1 million as the Company aggressively cut overhead expenses.
Total other expense in the six-month period was $3.4 million, up from $2.8 million in the same period last year. Interest expense increased to $747,000 from $113,000 in association with the GasRock note payable. The Company also incurred a $2.7 million charge for amortization of deferred financing costs and discount on note payable in the six-month period, up from $99,000 in the year-ago period. Conversely, in the year-ago six-month period the Company had $2.6 million in liquidated damages pursuant to a registration rights arrangement versus no expense in that category in the 2008 period. Net loss for the six-month period, including the $6.8 million impairment, was $11.2 million, or $0.10 per basic and diluted share, as compared with $6.4 million, or $0.06 per basic and diluted share, in the same period last year.
About Rancher Energy Corp.
Rancher Energy is an innovative oil & gas exploration & development company with a targeted strategy to reinvigorate older, historically productive oil fields in the hydrocarbon-rich Rocky Mountain region of the United States. Using waterflood injection and CO2 flooding, coupled with other leading edge hydrocarbon recovery techniques such as 3-D seismic data and directional drilling, Rancher Energy plans to extract proven in-place oil that remains behind in mature fields. Rising energy demand combined with advances in oil recovery have made this strategy profitable. Rancher Energy is taking advantage of this convergence by acquiring low risk, high quality, historically productive plays with under-exploited reserves and developing customized enhanced recovery strategies to maximize production.
Forward-Looking Statements
This press release includes forward-looking statements as determined by the U.S. Securities and Exchange Commission (the "SEC"). All statements, other than statements of historical facts, included in this press release that address activities, events, or developments that the Company believes or anticipates will or may occur in the future are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include the Company's ability to obtain financing to implement its plan, to construct pipeline and other infrastructure, and for other operational and working capital purposes, the uncertainty of recovery factors for the enhanced oil recovery projects, the volatility of oil prices, general economic and business conditions, and other factors over which the Company has little or no control. The Company does not intend (and is not obligated) to update publicly any forward-looking statements. The contents of this press release should be considered in conjunction with the warnings and cautionary statements contained in the Company's recent filings with the SEC.
Rancher Energy Corp.
Consolidated Statements of Operations
(unaudited)
Three months ended Six months ended
September 30, September 30,
2008 2007 2008 2007
------------ ------------ ------------ ------------
Revenues:
Oil & gas sales $ 1,995,901 $ 1,650,628 $ 3,894,869 $ 2,981,107
Gain (loss) on
derivative
activities, net 1,305,551 - (589,743) -
------------ ------------ ------------ ------------
Total revenues 3,301,452 1,650,628 3,305,126 2,981,107
Operating expenses:
Production taxes 243,366 201,182 473,649 362,651
Lease operating
expenses 549,441 691,429 1,172,863 1,279,661
Depreciation,
depletion and
amortization 301,708 368,724 577,549 700,256
Accretion expense 30,835 31,618 77,111 77,608
Impairment of
unproved
properties 6,800,000 - 6,800,000 -
Exploration expense - 89,668 9,602 130,829
General and
administrative
expense 959,777 1,513,100 2,008,154 4,053,091
------------ ------------ ------------ ------------
Total operating
expenses 8,885,127 2,895,721 11,118,928 6,604,096
------------ ------------ ------------ ------------
Loss from operations (5,583,675) (1,245,093) (7,813,802) (3,622,989)
------------ ------------ ------------ ------------
Other income (expense):
Liquidated damages
pursuant to
registration rights
arrangement - (1,268,283) - (2,645,393)
Amortization of
deferred financing
costs and discount
on note payable (1,366,527) (99,254) (2,675,702) (99,254)
Interest expense (375,399) (41,941) (746,694) (113,180)
Interest and other
income 8,737 25,541 19,318 73,865
------------ ------------ ------------ ------------
Total other
expense (1,733,189) (1,383,937) (3,403,078) (2,783,962)
------------ ------------ ------------ ------------
Net loss $ (7,316,864) $ (2,629,030) $(11,216,880) $ (6,406,951)
============ ============ ============ ============
Basic and diluted
net loss per share $ (0.06) $ (0.02) $ (0.10) $ (0.06)
============ ============ ============ ============
Basic and diluted
weighted average
shares outstanding 115,457,475 108,018,888 115,213,149 105,888,646
Rancher Energy Corp.
Consolidated Balance Sheets
(Unaudited)
September 30, March 31,
2008 2008
ASSETS ------------ ------------
Current Assets:
Cash and cash equivalents $ 5,141,371 $ 6,842,365
Accounts receivable and prepaid expenses 1,000,029 1,170,641
------------ ------------
Total current assets 6,141,400 8,013,006
Oil & gas properties, at cost
(successful efforts method):
Unproved 54,054,852 54,058,073
Proved 20,920,412 20,734,143
Less: Accumulated depletion, depreciation,
amortization and impairment (8,810,672) (1,531,619)
------------ ------------
Net oil & gas properties 66,164,592 73,260,597
Other assets:
Furniture and equipment, net of accumulated
depreciation of $288,107 and $204,420,
respectively 863,643 997,196
Other assets 903,630 1,300,382
------------ ------------
Total other assets 1,767,273 2,297,578
------------ ------------
Total assets $ 74,073,265 $ 83,571,181
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 1,229,472 $ 2,114,204
Accrued oil & gas property costs 250,000 250,000
Asset retirement obligation 360,638 337,685
Note payable, net of unamortized discount
of $366,123 and $2,527,550, respectively 11,873,877 9,712,450
Derivative liability 713,063 590,480
------------ ------------
Total current liabilities 14,427,050 13,004,819
Long-term liabilities:
Derivative liability 55,158 246,553
Asset retirement obligation 974,311 922,166
------------ ------------
Total long-term liabilities 1,029,469 1,168,719
Commitments and contingencies: - -
Stockholders' equity:
Common stock 1,162 1,150
Additional paid-in capital 92,226,152 91,790,181
Accumulated deficit (33,610,568) (22,393,688)
------------ ------------
Total stockholders' equity 58,616,746 69,397,643
------------ ------------
Total liabilities and stockholders' equity $ 74,073,265 $ 83,571,181
============ ============
Contacts:
John Works
Chief Executive Officer
Rancher Energy Corp.
303-629-1125
Jay Pfeiffer
Pfeiffer High Investor Relations, Inc.
303-393-7044
SOURCE: Rancher Energy
Copyright 2008 Market Wire, All rights reserved.
Blue Dolphin Energy Company Reports Third Quarter Results
HOUSTON, Nov 13, 2008 /PRNewswire-FirstCall via COMTEX/ -- Blue Dolphin Energy Company (BDCO) ("we" or "our"), an independent oil and gas company with operations in the Gulf of Mexico, today released financial results for the three and nine month periods ended September 30, 2008.
For the three months ended September 30, 2008, we reported a net loss of $442,737 on revenues of $681,279 compared to a net loss of $238,148 on revenues of $785,588 for the three months ended September 30, 2007. The increase in net loss and reduction in revenues were primarily attributable to the impact of Hurricane Ike. As a result of Hurricane Ike, from September 13, 2008 forward, our oil and gas wells have been shut-in and our pipeline transportation revenues were significantly reduced. Although pipeline transportation revenues returned to pre-Hurricane Ike levels in early October, our oil and gas production remains shut-in due to downstream third-party onshore infrastructure damage. We experienced minimal physical damage to our assets; our pipeline and shore facilities are fully operational. Our oil and gas production is not expected to resume until late in the fourth quarter of 2008 or early first quarter of 2009.
(In thousands, except per share amounts)
Three Months Ended
September 30, Net Change
2008 2007 2008 vs 2007
Revenues $681 $786 $(105)
Net loss $(443) $(238) $(205)
Net loss per common share
Basic $(0.04) $(0.02) $(0.02)
Diluted $(0.04) $(0.02) $(0.02)
For the nine months ended September 30, 2008, we reported a net loss of $1,143,590 on revenues of $2,348,771 compared to a net loss of $1,341,821 on revenues of $2,261,511 for the nine months ended September 30, 2007. Despite the adverse impact of Hurricane Ike on both our oil and gas production and pipeline transportation revenues, our financial results reflect a reduction in the net loss for the nine months of 2008, primarily due to an increase in revenue from oil and gas sales and a decrease in pipeline operating expenses.
(In thousands, except per share amounts)
Nine Months Ended
September 30, Net Change
2008 2007 2008 vs 2007
Revenues $2,349 $2,262 $87
Net loss $(1,144) $(1,342) $198
Net loss per common share
Basic $(0.10) $(0.12) $0.02
Diluted $(0.10) $(0.12) $0.02
There are currently 11,654,207 shares of our common stock issued and outstanding.
Blue Dolphin Energy Company is engaged in the gathering and transportation of natural gas and condensate and production of oil and gas. For further information visit the Company's website at http://www.blue-dolphin.com.
Certain of the statements included in this press release, which express a belief, expectation or intention, as well as those regarding future financial performance or results, or which are not historical facts, are "forward-looking" statements as that term is defined in the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. The words "expect", "plan", "believe", "anticipate", "project", "estimate", and similar expressions are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance or events and such statements involve a number of risks, uncertainties and assumptions, including but not limited to industry conditions, prices of crude oil and natural gas, regulatory changes, general economic conditions, interest rates, competition, and other factors. Should one or more of these risks or uncertainties materialize or should the underlying assumptions prove incorrect, actual results and outcomes may differ materially from those indicated in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
SOURCE Blue Dolphin Energy Company
Copyright (C) 2008 PR Newswire. All rights reserved
For the three months ended September 30, 2008, we reported a net loss of $442,737 on revenues of $681,279 compared to a net loss of $238,148 on revenues of $785,588 for the three months ended September 30, 2007. The increase in net loss and reduction in revenues were primarily attributable to the impact of Hurricane Ike. As a result of Hurricane Ike, from September 13, 2008 forward, our oil and gas wells have been shut-in and our pipeline transportation revenues were significantly reduced. Although pipeline transportation revenues returned to pre-Hurricane Ike levels in early October, our oil and gas production remains shut-in due to downstream third-party onshore infrastructure damage. We experienced minimal physical damage to our assets; our pipeline and shore facilities are fully operational. Our oil and gas production is not expected to resume until late in the fourth quarter of 2008 or early first quarter of 2009.
(In thousands, except per share amounts)
Three Months Ended
September 30, Net Change
2008 2007 2008 vs 2007
Revenues $681 $786 $(105)
Net loss $(443) $(238) $(205)
Net loss per common share
Basic $(0.04) $(0.02) $(0.02)
Diluted $(0.04) $(0.02) $(0.02)
For the nine months ended September 30, 2008, we reported a net loss of $1,143,590 on revenues of $2,348,771 compared to a net loss of $1,341,821 on revenues of $2,261,511 for the nine months ended September 30, 2007. Despite the adverse impact of Hurricane Ike on both our oil and gas production and pipeline transportation revenues, our financial results reflect a reduction in the net loss for the nine months of 2008, primarily due to an increase in revenue from oil and gas sales and a decrease in pipeline operating expenses.
(In thousands, except per share amounts)
Nine Months Ended
September 30, Net Change
2008 2007 2008 vs 2007
Revenues $2,349 $2,262 $87
Net loss $(1,144) $(1,342) $198
Net loss per common share
Basic $(0.10) $(0.12) $0.02
Diluted $(0.10) $(0.12) $0.02
There are currently 11,654,207 shares of our common stock issued and outstanding.
Blue Dolphin Energy Company is engaged in the gathering and transportation of natural gas and condensate and production of oil and gas. For further information visit the Company's website at http://www.blue-dolphin.com.
Certain of the statements included in this press release, which express a belief, expectation or intention, as well as those regarding future financial performance or results, or which are not historical facts, are "forward-looking" statements as that term is defined in the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. The words "expect", "plan", "believe", "anticipate", "project", "estimate", and similar expressions are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance or events and such statements involve a number of risks, uncertainties and assumptions, including but not limited to industry conditions, prices of crude oil and natural gas, regulatory changes, general economic conditions, interest rates, competition, and other factors. Should one or more of these risks or uncertainties materialize or should the underlying assumptions prove incorrect, actual results and outcomes may differ materially from those indicated in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
SOURCE Blue Dolphin Energy Company
Copyright (C) 2008 PR Newswire. All rights reserved
Basic Earth Releases 2nd Quarter Results
DENVER, Nov 14, 2008 /PRNewswire-FirstCall via COMTEX/ -- Basic Earth Science Systems, Inc. (Basic) (BSIC) reported net income of $946,000, nearly five and one-half cents ($0.054) per share, on oil and gas sales revenue of $2,697,000 for the quarter ended September 30, 2008. This compares to net income of $430,000 (as restated), two and one-half cents ($0.025) per share, on oil and gas sales revenue of $1,789,000 for the quarter ended September 30, 2007. The $908,000 (51%) increase in oil and gas sales revenue and $516,000 (120%) increase in net income was due primarily to increases in oil and gas prices.
"We are indeed pleased to report another great quarter," commented Ray Singleton, President of Basic. "The combination of high commodity prices and the effect of our new Colorado wells coming on production have certainly supported the results of our second fiscal quarter. However, we, like many of you, are concerned about what our unfolding economy will bring. Oil prices, especially in the Williston basin, have certainly declined. Current economic conditions and lower commodity prices will affect all of us in this industry."
"Here is the good news," Singleton continued. "We, here at Basic, have been through this before. Ten years ago, as oil prices in the field went below $10 a barrel, we were caught with too much debt and little cash to make it from month-to-month. Things are different today. This Company has never been in better shape to handle a downturn. We have no debt and have cash reserves to weather this storm. We believe we are in good shape. For the last several years, there are those in this industry that pursued projects that were less than lucrative, even at high commodity prices. Deals were made, funded and drilled based on much higher commodity price expectations. Those companies' balance sheets are loaded with recent, historical costs that are ripe for impairment. As a result, we are very optimistic. We believe we will see a number of strategic opportunities within the next six months to purchase properties at discounts to levels experienced last year. We hope to make accretive purchases due to our relative corporate strength going into the upcoming economic conditions. We will be looking for situations where we can put our un-leveraged, un-margined, high cash flow, balance sheet to work expanding Basic Earth's asset base."
Founded in 1969, Basic is an oil and gas exploration and production company with primary operations in select areas of the Williston basin, the Denver-Julesburg basin in Colorado, the southern portions of Texas, and along the on-shore portions of the Gulf Coast. Basic is traded on the "over-the-counter - bulletin board" under the symbol BSIC. Basic's web site is at http://www.basicearth.net where additional information about the Company can be accessed.
Information herein contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which can be identified by words such as "should," "may," "will," "anticipate," "estimate," "intend" or "continue," or comparable words or phrases. In addition, all statements other than statements of historical facts that address activities that Basic intends, expects or anticipates will or may occur in the future are forward-looking statements. Readers are encouraged to read the SEC reports of Basic, particularly the Company's Quarterly Report on Form 10-Q for the quarters ended June 30, 2008, in addition to the Company's Annual Report on Form 10-KSB for the fiscal year ended March 31, 2008, for meaningful cautionary language disclosing why actual results may vary materially from those anticipated by management.
Financial Highlights
Six Months Ended Quarter Ended
September 30 September 30
(As Restated) (As Restated)
2008 2007 2008 2007
Total Revenue $6,054,000 $3,408,000 $2,735,000 $1,794,000
Net income 2,326,000 717,000 946,000 430,000
Basic net income
per share .133 .042 .054 .025
Diluted net income
per share .133 .042 .054 .025
Weighted average
number of shares
outstanding
- basic 17,465,585 16,964,503 17,465,585 16,973,665
- diluted 17,468,898 17,132,679 17,468,898 17,132,144
SOURCE Basic Earth Science Systems, Inc.
http://www.basicearth.net
Copyright (C) 2008 PR Newswire. All rights reserved
"We are indeed pleased to report another great quarter," commented Ray Singleton, President of Basic. "The combination of high commodity prices and the effect of our new Colorado wells coming on production have certainly supported the results of our second fiscal quarter. However, we, like many of you, are concerned about what our unfolding economy will bring. Oil prices, especially in the Williston basin, have certainly declined. Current economic conditions and lower commodity prices will affect all of us in this industry."
"Here is the good news," Singleton continued. "We, here at Basic, have been through this before. Ten years ago, as oil prices in the field went below $10 a barrel, we were caught with too much debt and little cash to make it from month-to-month. Things are different today. This Company has never been in better shape to handle a downturn. We have no debt and have cash reserves to weather this storm. We believe we are in good shape. For the last several years, there are those in this industry that pursued projects that were less than lucrative, even at high commodity prices. Deals were made, funded and drilled based on much higher commodity price expectations. Those companies' balance sheets are loaded with recent, historical costs that are ripe for impairment. As a result, we are very optimistic. We believe we will see a number of strategic opportunities within the next six months to purchase properties at discounts to levels experienced last year. We hope to make accretive purchases due to our relative corporate strength going into the upcoming economic conditions. We will be looking for situations where we can put our un-leveraged, un-margined, high cash flow, balance sheet to work expanding Basic Earth's asset base."
Founded in 1969, Basic is an oil and gas exploration and production company with primary operations in select areas of the Williston basin, the Denver-Julesburg basin in Colorado, the southern portions of Texas, and along the on-shore portions of the Gulf Coast. Basic is traded on the "over-the-counter - bulletin board" under the symbol BSIC. Basic's web site is at http://www.basicearth.net where additional information about the Company can be accessed.
Information herein contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which can be identified by words such as "should," "may," "will," "anticipate," "estimate," "intend" or "continue," or comparable words or phrases. In addition, all statements other than statements of historical facts that address activities that Basic intends, expects or anticipates will or may occur in the future are forward-looking statements. Readers are encouraged to read the SEC reports of Basic, particularly the Company's Quarterly Report on Form 10-Q for the quarters ended June 30, 2008, in addition to the Company's Annual Report on Form 10-KSB for the fiscal year ended March 31, 2008, for meaningful cautionary language disclosing why actual results may vary materially from those anticipated by management.
Financial Highlights
Six Months Ended Quarter Ended
September 30 September 30
(As Restated) (As Restated)
2008 2007 2008 2007
Total Revenue $6,054,000 $3,408,000 $2,735,000 $1,794,000
Net income 2,326,000 717,000 946,000 430,000
Basic net income
per share .133 .042 .054 .025
Diluted net income
per share .133 .042 .054 .025
Weighted average
number of shares
outstanding
- basic 17,465,585 16,964,503 17,465,585 16,973,665
- diluted 17,468,898 17,132,679 17,468,898 17,132,144
SOURCE Basic Earth Science Systems, Inc.
http://www.basicearth.net
Copyright (C) 2008 PR Newswire. All rights reserved
Aurora Oil and Gas Corporation Announces Management Changes
TRAVERSE CITY, Mich., Nov 14, 2008 /PRNewswire-FirstCall via COMTEX/ -- Aurora Oil & Gas Corporation (AOG) today announced recent changes to its management team.
Effective immediately, Mr. John E. McDevitt has resigned as President and Chief Operating Officer. Mr. McDevitt joined Aurora in January 2008, to assist with refinancing efforts and provide direction to the Company's operational efforts. Due to family-related concerns, Mr. McDevitt will leave his position on the management team. He will continue to serve on the Company's Board of Directors.
Mr. William W. Deneau, Chief Executive Officer, commented, "John stepped into his role at a time when the Company needed his enthusiasm, guidance and strategic direction. He painstakingly represented Aurora in the midst of challenging global financial conditions. Over the last several months, our direction has evolved from a focus on refinancing to de-leveraging via asset sales. We have agreed that this is an opportune time for John to exit, and introduce new leadership to complete the execution of our new strategic direction."
Mr. Gilbert A. Smith, currently serving as Vice President of Land and Business Development, has been appointed to the position of President. Mr. Smith joined Aurora in February 2008, bringing nearly 40 years of domestic and international oil and gas industry experience, specializing in land administration, asset transactions, and contract negotiation. His prior organizations include CDX Gas, Phillips Petroleum, and Oryx Energy Company.
Mr. Deneau commented, "Gil is perfectly suited for the next phase of our business cycle, specifically, optimizing our portfolio of assets. During his short tenure with Aurora, Gil has proved his ability to manage our enterprise by combining his industry experience and business acumen to make him an incredibly effective leader in our organization. We are pleased to have him continue his efforts with Aurora in this important role."
About Aurora Oil & Gas Corporation
Aurora Oil & Gas Corporation is an independent energy company focused on unconventional natural gas exploration, acquisition, development and production with its primary operations in the Antrim shale of Michigan and the New Albany shale of Indiana and Kentucky.
Cautionary Note on Forward-Looking Statements
Statements regarding future events, beliefs or results, including efforts to de-leverage and optimize the asset portfolio are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although we believe that the forward-looking statements described are based on reasonable assumptions, we can give no assurance that they will prove accurate. Important factors that could cause our actual results to differ materially from those included in the forward-looking statements are more fully described in our filings with the Securities and Exchange Commission. All forward-looking statements contained in this release are based on management's outlook only as of the date of this release and we undertake no obligation to update or revise these forward-looking statements, whether as a result of subsequent developments or otherwise.
Join our email distribution list: Here
Contact:
Aurora Oil & Gas Corporation
Jeffrey W. Deneau, Investor Relations
(231) 941-0073
www.auroraogc.com
SOURCE Aurora Oil & Gas Corporation
http://www.auroraogc.com
Copyright (C) 2008 PR Newswire. All rights reserved
Effective immediately, Mr. John E. McDevitt has resigned as President and Chief Operating Officer. Mr. McDevitt joined Aurora in January 2008, to assist with refinancing efforts and provide direction to the Company's operational efforts. Due to family-related concerns, Mr. McDevitt will leave his position on the management team. He will continue to serve on the Company's Board of Directors.
Mr. William W. Deneau, Chief Executive Officer, commented, "John stepped into his role at a time when the Company needed his enthusiasm, guidance and strategic direction. He painstakingly represented Aurora in the midst of challenging global financial conditions. Over the last several months, our direction has evolved from a focus on refinancing to de-leveraging via asset sales. We have agreed that this is an opportune time for John to exit, and introduce new leadership to complete the execution of our new strategic direction."
Mr. Gilbert A. Smith, currently serving as Vice President of Land and Business Development, has been appointed to the position of President. Mr. Smith joined Aurora in February 2008, bringing nearly 40 years of domestic and international oil and gas industry experience, specializing in land administration, asset transactions, and contract negotiation. His prior organizations include CDX Gas, Phillips Petroleum, and Oryx Energy Company.
Mr. Deneau commented, "Gil is perfectly suited for the next phase of our business cycle, specifically, optimizing our portfolio of assets. During his short tenure with Aurora, Gil has proved his ability to manage our enterprise by combining his industry experience and business acumen to make him an incredibly effective leader in our organization. We are pleased to have him continue his efforts with Aurora in this important role."
About Aurora Oil & Gas Corporation
Aurora Oil & Gas Corporation is an independent energy company focused on unconventional natural gas exploration, acquisition, development and production with its primary operations in the Antrim shale of Michigan and the New Albany shale of Indiana and Kentucky.
Cautionary Note on Forward-Looking Statements
Statements regarding future events, beliefs or results, including efforts to de-leverage and optimize the asset portfolio are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although we believe that the forward-looking statements described are based on reasonable assumptions, we can give no assurance that they will prove accurate. Important factors that could cause our actual results to differ materially from those included in the forward-looking statements are more fully described in our filings with the Securities and Exchange Commission. All forward-looking statements contained in this release are based on management's outlook only as of the date of this release and we undertake no obligation to update or revise these forward-looking statements, whether as a result of subsequent developments or otherwise.
Join our email distribution list: Here
Contact:
Aurora Oil & Gas Corporation
Jeffrey W. Deneau, Investor Relations
(231) 941-0073
www.auroraogc.com
SOURCE Aurora Oil & Gas Corporation
http://www.auroraogc.com
Copyright (C) 2008 PR Newswire. All rights reserved
American Natural Energy Corporation Announces Return to Trading
TULSA, Okla., Nov. 14, 2008 (Canada NewsWire via COMTEX) ----American Natural Energy Corporation (the "Company") (TSX Venture: ANR.U) is pleased to announce that, effective at the opening day, November 17, 2008, the common shares of the Company are scheduled to be reinstated to trading on the TSX Venture Exchange (the "Exchange"). The Company's common shares were suspended from trading on the Exchange on July 25, 2007 as a result of a cease trade order issued by the British Columbia Securities Commission, and subsequent cease trade orders issued in Alberta, Manitoba, Ontario and Quebec, for failure to timely file financial statements for the fiscal year ended December 31, 2006.
As announced in the Company's news release of October 30, 2008, the cease trade orders were revoked on October 29, 2008. The Company has filed all annual and interim financial statements and related management's discussion and analysis, and its continuous disclosure filings are up-to-date. As part of seeking revocation of the cease trade orders, the Company filed an amended Form 51-101F1 and amended Form 51-101F3, pursuant to National Instrument 51-101 Standards of Disclosure for Oil And Gas Activities, under the Company's profile on SEDAR at http://www.sedar.com.
<< Recent Business of the Company >>
The Company's exploration and development of its Bayou Couba oil and gas leases in St. Charles Parish, Louisiana have continued to move forward and were unaffected by the cease trade orders.
On October 19, 2005, the Company executed an exploration and development agreement (the "Agreement") with Dune Energy, Inc., which provided for the creation of an area of mutual interest in St. Charles Parish, Louisiana, covering an area of approximately 31,367 acres. On June 26, 2007, Dune Energy paid the Company the sum of $3 million to increase its participation to 75% of the Company's interest under the Agreement, excluding the area of the Company's Bayou Couba lease in which the Company retains a 50% interest. On September 1, 2007, Dune Energy was elected successor operator under the Agreement and paid the Company an additional $500,000, which was used by reduce existing obligations of the Company.
During 2007 and to date in 2008, the Company has participated in an expanded 255 square mile 3D seismic survey and evaluation with ExxonMobil of which the Company received an exclusive license covering 60 square miles which includes its Bayou Couba joint development area. The interpretation of the seismic survey has been ongoing and has produced numerous exploration and development prospects.
The Company plans to seek industry participation in the development of its interests in its oil and natural gas properties, and debt or equity financing to reduce its current liabilities. Additional information about the Company can be found under its profile on SEDAR at http://www.sedar.com.
<< Board of Directors >>
There has been no change in the board of directors of the Company since the cease trade orders were issued.
The board of directors consists of Michael K. Paulk, the President and Chief Executive Officer, Steven P. Ensz, the Vice-President, Finance, Chief Financial Officer and Secretary, and two independent directors, Brian E. Bayley and John K. Campbell. In connection with the Company's debenture financing in 2003, the holders of such debentures are entitled to designate two additional persons to serve as directors. At present, such director positions remain vacant.
Michael Paulk was elected as a director, and appointed the President and Chief Executive Officer of the Company in July of 2001. From October 1994 to January 2001, when it was sold to Chesapeake Energy Corporation, Mr. Paulk was the President and a director of Gothic Energy Corporation, which during his tenure was engaged in the acquisition, development, exploration and production of natural gas and oil. Mr. Paulk has been involved in the oil and gas industry for more than thirty years.
Steven Ensz has been Vice-President, Finance, Chief Financial Officer and Secretary of the Company since July of 2001. He is a certified public accountant and is responsible for all of the Company's financial disclosure and reporting. From March of 1998 to January of 2001, he held a similar position with Gothic Energy Corporation, and from July 1991 to February 1998, he was Vice-President, Finance of Anglo-Suisse, Inc., an oil and natural gas exploration and producing company. Mr. Ensz has held various positions within the energy industry, including President of Waterford Energy, an independent oil and gas producer, for more than 25 years.
Brian E. Bayley was elected a director of the Company on June 1, 2001. Mr. Bayley has been the co-chair of Quest Capital Corp. since January 1, 2008, prior to which he was the President and Chief Executive Officer from June 2003 to January 1, 2008 and the Chief Executive Officer from June, 2003 to March 17, 2008. Quest Capital Corp. is a mortgage investment corporation whose shares are listed on the Toronto Stock Exchange, and provides financial services to small and mid-cap companies operating primarily in North America. Mr. Bayley currently serves as a director or officer of numerous other public companies, none of which is a reporting issuer under U.S. securities laws, including Esperanza Silver Corp. and PetroFalcon Corporation. Mr. Bayley is also a director of TransAtlantic Petroleum (USA: 3.40, -0.06, -1.73%) Corp., which also provided financing to the Company, and purchased $3.0 million principal amount of the Company's 8% convertible secured debentures, in 2003.
John K. Campbell has been a director of the Company since April of 2000, and was the President of Gothic Energy Corporation from April 2000 to July 2001. Mr. Campbell recently retired as the President of TransAmerica Industries Ltd., a position he had held since 1986.
<< Share Capital >>
The Company is authorized to issue 250,000,000 common shares, of which 52,997,673 common shares are currently issued and outstanding.
The Company is a Tulsa, Oklahoma based independent exploration and production company with operations in St. Charles Parish, Louisiana. For further information, please contact Michael Paulk at 918-481-1440, or Steven P. Ensz at 281-367-5588.
The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.
This Press Release may contain statements which constitute forward-looking statements (including within the meaning of the US Private Securities Litigation Reform Act of 1995), including statements regarding the plans, intentions, beliefs and current expectations of the Company, its directors, or its officers with respect to the future business, well drilling and operating activities and performance of the Company. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties. The actual results and outcome of events may differ materially from those in the forward-looking statements as a result of various factors. The levels of and fluctuations in the prices for natural gas and oil and the demand for those commodities, the outcome of the Company's development and exploration activities, including the success of its current and proposed well drilling activities and the availability of capital to pursue those activities could affect the Company and its future prospects. The Company's inability to raise additional capital would adversely affect its ability to pursue its drilling program and its liquidity. Important additional factors that could cause such differences are described in the Company's periodic reports and other filings made with the Securities and Exchange Commission and may be viewed at the SEC's website at http://www.sec.gov.
SOURCE: American Natural Energy Corporation
P. Ensz, +1-281-367-5588, both of American Natural Energy Corporation
As announced in the Company's news release of October 30, 2008, the cease trade orders were revoked on October 29, 2008. The Company has filed all annual and interim financial statements and related management's discussion and analysis, and its continuous disclosure filings are up-to-date. As part of seeking revocation of the cease trade orders, the Company filed an amended Form 51-101F1 and amended Form 51-101F3, pursuant to National Instrument 51-101 Standards of Disclosure for Oil And Gas Activities, under the Company's profile on SEDAR at http://www.sedar.com.
<< Recent Business of the Company >>
The Company's exploration and development of its Bayou Couba oil and gas leases in St. Charles Parish, Louisiana have continued to move forward and were unaffected by the cease trade orders.
On October 19, 2005, the Company executed an exploration and development agreement (the "Agreement") with Dune Energy, Inc., which provided for the creation of an area of mutual interest in St. Charles Parish, Louisiana, covering an area of approximately 31,367 acres. On June 26, 2007, Dune Energy paid the Company the sum of $3 million to increase its participation to 75% of the Company's interest under the Agreement, excluding the area of the Company's Bayou Couba lease in which the Company retains a 50% interest. On September 1, 2007, Dune Energy was elected successor operator under the Agreement and paid the Company an additional $500,000, which was used by reduce existing obligations of the Company.
During 2007 and to date in 2008, the Company has participated in an expanded 255 square mile 3D seismic survey and evaluation with ExxonMobil of which the Company received an exclusive license covering 60 square miles which includes its Bayou Couba joint development area. The interpretation of the seismic survey has been ongoing and has produced numerous exploration and development prospects.
The Company plans to seek industry participation in the development of its interests in its oil and natural gas properties, and debt or equity financing to reduce its current liabilities. Additional information about the Company can be found under its profile on SEDAR at http://www.sedar.com.
<< Board of Directors >>
There has been no change in the board of directors of the Company since the cease trade orders were issued.
The board of directors consists of Michael K. Paulk, the President and Chief Executive Officer, Steven P. Ensz, the Vice-President, Finance, Chief Financial Officer and Secretary, and two independent directors, Brian E. Bayley and John K. Campbell. In connection with the Company's debenture financing in 2003, the holders of such debentures are entitled to designate two additional persons to serve as directors. At present, such director positions remain vacant.
Michael Paulk was elected as a director, and appointed the President and Chief Executive Officer of the Company in July of 2001. From October 1994 to January 2001, when it was sold to Chesapeake Energy Corporation, Mr. Paulk was the President and a director of Gothic Energy Corporation, which during his tenure was engaged in the acquisition, development, exploration and production of natural gas and oil. Mr. Paulk has been involved in the oil and gas industry for more than thirty years.
Steven Ensz has been Vice-President, Finance, Chief Financial Officer and Secretary of the Company since July of 2001. He is a certified public accountant and is responsible for all of the Company's financial disclosure and reporting. From March of 1998 to January of 2001, he held a similar position with Gothic Energy Corporation, and from July 1991 to February 1998, he was Vice-President, Finance of Anglo-Suisse, Inc., an oil and natural gas exploration and producing company. Mr. Ensz has held various positions within the energy industry, including President of Waterford Energy, an independent oil and gas producer, for more than 25 years.
Brian E. Bayley was elected a director of the Company on June 1, 2001. Mr. Bayley has been the co-chair of Quest Capital Corp. since January 1, 2008, prior to which he was the President and Chief Executive Officer from June 2003 to January 1, 2008 and the Chief Executive Officer from June, 2003 to March 17, 2008. Quest Capital Corp. is a mortgage investment corporation whose shares are listed on the Toronto Stock Exchange, and provides financial services to small and mid-cap companies operating primarily in North America. Mr. Bayley currently serves as a director or officer of numerous other public companies, none of which is a reporting issuer under U.S. securities laws, including Esperanza Silver Corp. and PetroFalcon Corporation. Mr. Bayley is also a director of TransAtlantic Petroleum (USA: 3.40, -0.06, -1.73%) Corp., which also provided financing to the Company, and purchased $3.0 million principal amount of the Company's 8% convertible secured debentures, in 2003.
John K. Campbell has been a director of the Company since April of 2000, and was the President of Gothic Energy Corporation from April 2000 to July 2001. Mr. Campbell recently retired as the President of TransAmerica Industries Ltd., a position he had held since 1986.
<< Share Capital >>
The Company is authorized to issue 250,000,000 common shares, of which 52,997,673 common shares are currently issued and outstanding.
The Company is a Tulsa, Oklahoma based independent exploration and production company with operations in St. Charles Parish, Louisiana. For further information, please contact Michael Paulk at 918-481-1440, or Steven P. Ensz at 281-367-5588.
The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.
This Press Release may contain statements which constitute forward-looking statements (including within the meaning of the US Private Securities Litigation Reform Act of 1995), including statements regarding the plans, intentions, beliefs and current expectations of the Company, its directors, or its officers with respect to the future business, well drilling and operating activities and performance of the Company. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties. The actual results and outcome of events may differ materially from those in the forward-looking statements as a result of various factors. The levels of and fluctuations in the prices for natural gas and oil and the demand for those commodities, the outcome of the Company's development and exploration activities, including the success of its current and proposed well drilling activities and the availability of capital to pursue those activities could affect the Company and its future prospects. The Company's inability to raise additional capital would adversely affect its ability to pursue its drilling program and its liquidity. Important additional factors that could cause such differences are described in the Company's periodic reports and other filings made with the Securities and Exchange Commission and may be viewed at the SEC's website at http://www.sec.gov.
SOURCE: American Natural Energy Corporation
P. Ensz, +1-281-367-5588, both of American Natural Energy Corporation
Tuesday, November 11, 2008
Crude Drops Below $59 a Barrel as Demand Expectations Continue to Fall
Healthy assumptions that the International Energy Agency (IEA) will lower its forecast for oil demand in 2009, again drove crude oil prices down, as it settled at $59.33 barrel; it's lowest close since March 2007.
A number of factors, including the increasing strength of the U.S. dollar and the anemic equity markets continue to put downward pressure on energy prices.
So far the original 2008 forecast has been revised downward seven times this year, dropping usage by close to 1.3 million barrels a day.
Gasoline prices are mirroring the crude price drop, as regular gasonline across the U.S. dropped to an average of $2.22 a gallon, said the AAA.
On London's ICE Futures Europe exchange, Brent crude oil fell $3.37 for December delivery, settling at $55.71 a barrel.
A number of factors, including the increasing strength of the U.S. dollar and the anemic equity markets continue to put downward pressure on energy prices.
So far the original 2008 forecast has been revised downward seven times this year, dropping usage by close to 1.3 million barrels a day.
Gasoline prices are mirroring the crude price drop, as regular gasonline across the U.S. dropped to an average of $2.22 a gallon, said the AAA.
On London's ICE Futures Europe exchange, Brent crude oil fell $3.37 for December delivery, settling at $55.71 a barrel.
Monday, November 10, 2008
U.S. Energy Corp. to Host Conference Call to Discuss Third Quarter 2008 Operational Results and Corporate Update
RIVERTON, Wyo., Nov 10, 2008 (GlobeNewswire via COMTEX) -- U.S. Energy Corp. ("USE") (USEG) today announced it has released its financial results for the three and nine months ended September 30, 2008, in a form 10-Q filing with the SEC. The Company has also scheduled a conference call to update shareholders and analysts on the Company's second quarter operational progress and corporate update.
Third Quarter Operations and Corporate Update Conference Call
When: Thursday, November 13th at 12:00 PM ET (10:00 AM Mountain).
Dial-In Number: (877) 627-6581 (within U.S. and Canada), (719)
325-4904 (International).
Replay Number: (888) 203-1112 (within U.S. and Canada), (719)
457-0820 (International).
ID Number: 6715458. The replay will be available starting at
approximately 3:00 PM ET (1:00 PM MT) and will be available for
3 days through Midnight, Sunday, November 16th.
Webcast: Investors are also invited to listen to a live and/or
archived webcast of U.S. Energy Corp.'s quarterly conference call at
http://investor.usnrg.com/events.cfm. The webcast replay will be
available for one year.
About U.S. Energy Corp.
U.S. Energy Corp. is a diversified natural resource company with interests in molybdenum, oil and gas, and real estate. The Company is headquartered in Riverton, Wyoming and its common stock is listed on The NASDAQ Capital Market under the symbol "USEG."
Disclosure Regarding Mineral Resources Under SEC and Canadian Regulations; and Forward-Looking Statements
The Company owns or may come to own stock in companies which are traded on foreign exchanges, and may have agreements with some of these companies to acquire and/or develop the Company's mineral properties. An example is Sutter Gold Mining Inc. These other companies are subject to the reporting requirements of other jurisdictions.
United States residents are cautioned that some of the information available about our mineral properties, which is reported by the other companies in foreign jurisdictions, may be materially different from what the Company is permitted to disclose in the United States.
This news release includes statements which may constitute "forward-looking" statements, usually containing the words "believe," "estimate," "project," "expect," or similar expressions. These statements are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, future trends in mineral prices, the availability of capital, competitive factors, and other risks. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revision or changes after the date of this release.
For further information on the differences between the reporting limitations of the United States, compared to reports filed in foreign jurisdictions, and also concerning forward-looking statements, please see the Company's Form 10-K ("Disclosure Regarding Forward-Looking Statements"; "Disclosure Regarding Mineral Resources under SEC and Canadian Regulation"; and "Risk Factors"); and similar disclosures in the Company's Forms 10-Q.
This news release was distributed by GlobeNewswire, www.globenewswire.com
SOURCE: U.S. Energy Corp.
U.S. Energy Corp.
Reggie Larsen, Director of Investor Relations
(800) 776-9271
Reggie@usnrg.com
The Equicom Group
Investor Relations
Nick Hurst
(403) 538-4845
nhurst@equicomgroup.com
(C) Copyright 2008 GlobeNewswire, Inc. All rights reserved.
Third Quarter Operations and Corporate Update Conference Call
When: Thursday, November 13th at 12:00 PM ET (10:00 AM Mountain).
Dial-In Number: (877) 627-6581 (within U.S. and Canada), (719)
325-4904 (International).
Replay Number: (888) 203-1112 (within U.S. and Canada), (719)
457-0820 (International).
ID Number: 6715458. The replay will be available starting at
approximately 3:00 PM ET (1:00 PM MT) and will be available for
3 days through Midnight, Sunday, November 16th.
Webcast: Investors are also invited to listen to a live and/or
archived webcast of U.S. Energy Corp.'s quarterly conference call at
http://investor.usnrg.com/events.cfm. The webcast replay will be
available for one year.
About U.S. Energy Corp.
U.S. Energy Corp. is a diversified natural resource company with interests in molybdenum, oil and gas, and real estate. The Company is headquartered in Riverton, Wyoming and its common stock is listed on The NASDAQ Capital Market under the symbol "USEG."
Disclosure Regarding Mineral Resources Under SEC and Canadian Regulations; and Forward-Looking Statements
The Company owns or may come to own stock in companies which are traded on foreign exchanges, and may have agreements with some of these companies to acquire and/or develop the Company's mineral properties. An example is Sutter Gold Mining Inc. These other companies are subject to the reporting requirements of other jurisdictions.
United States residents are cautioned that some of the information available about our mineral properties, which is reported by the other companies in foreign jurisdictions, may be materially different from what the Company is permitted to disclose in the United States.
This news release includes statements which may constitute "forward-looking" statements, usually containing the words "believe," "estimate," "project," "expect," or similar expressions. These statements are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, future trends in mineral prices, the availability of capital, competitive factors, and other risks. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revision or changes after the date of this release.
For further information on the differences between the reporting limitations of the United States, compared to reports filed in foreign jurisdictions, and also concerning forward-looking statements, please see the Company's Form 10-K ("Disclosure Regarding Forward-Looking Statements"; "Disclosure Regarding Mineral Resources under SEC and Canadian Regulation"; and "Risk Factors"); and similar disclosures in the Company's Forms 10-Q.
This news release was distributed by GlobeNewswire, www.globenewswire.com
SOURCE: U.S. Energy Corp.
U.S. Energy Corp.
Reggie Larsen, Director of Investor Relations
(800) 776-9271
Reggie@usnrg.com
The Equicom Group
Investor Relations
Nick Hurst
(403) 538-4845
nhurst@equicomgroup.com
(C) Copyright 2008 GlobeNewswire, Inc. All rights reserved.
Sunday, November 9, 2008
Black Gold. Texas Tea! Parshall, N.D. Oil Boom
What is that southern accent we're hearing in the North Dakota reservation town of Parshall? It's the voice of money to many of the residents who own mineral rights to land in the area.
Approximately 400 of the towns 1,000 or so people will benefit from the growing oil boom in the area, which is part of the Bakken oil formation. Every home or business owner, along with the Fort Berthold Indian Reservation have leased land to the oil roughnecks for Oklahoma and Texas.
Estimates from the U.S. Geological Survey in April are that up to 4.3 billion barrels of oil are recoverable from the Bakken. A lot of the Bakken is in western North Dakota, about two miles below the surface.
On the Fort Berthold Indian Reservation, some of the tribal members have already received significant royalties, with one family taking in close to $800,000 over the last few months, said Mervin Packineau, a member of the Three Affiliated Tribes business council.
The original location of the first drilling began north of Parshall, but now they're moving south. So far the oil companies have primarily avoided the more populated areas because of the need to negotiate hundreds of individual contracts.
One of the owners of an oil company from Wichita, Kansas, Todd Slawson, said his company, Slawson Exploration Co., has been drilling around the edge of Parshall city limits, and next month has plans to drill partially beneath the town itself. In 2009 they'll probably drill directly beneath the town.
Slawson added that the wells just outside the city have been performing good.
Residual effects of the oil boom for the town has been the increase of sales in most businesses, including the one restaurant in town; the filling up of most available rental rooms on a daily basis; and the sale of water to the oil companies from the city for use in drilling in order to break up the shale to release the oil.
Some results from Gulfport Energy in Bakken area. Go to Bakken sub-headline for results in the region.
Approximately 400 of the towns 1,000 or so people will benefit from the growing oil boom in the area, which is part of the Bakken oil formation. Every home or business owner, along with the Fort Berthold Indian Reservation have leased land to the oil roughnecks for Oklahoma and Texas.
Estimates from the U.S. Geological Survey in April are that up to 4.3 billion barrels of oil are recoverable from the Bakken. A lot of the Bakken is in western North Dakota, about two miles below the surface.
On the Fort Berthold Indian Reservation, some of the tribal members have already received significant royalties, with one family taking in close to $800,000 over the last few months, said Mervin Packineau, a member of the Three Affiliated Tribes business council.
The original location of the first drilling began north of Parshall, but now they're moving south. So far the oil companies have primarily avoided the more populated areas because of the need to negotiate hundreds of individual contracts.
One of the owners of an oil company from Wichita, Kansas, Todd Slawson, said his company, Slawson Exploration Co., has been drilling around the edge of Parshall city limits, and next month has plans to drill partially beneath the town itself. In 2009 they'll probably drill directly beneath the town.
Slawson added that the wells just outside the city have been performing good.
Residual effects of the oil boom for the town has been the increase of sales in most businesses, including the one restaurant in town; the filling up of most available rental rooms on a daily basis; and the sale of water to the oil companies from the city for use in drilling in order to break up the shale to release the oil.
Some results from Gulfport Energy in Bakken area. Go to Bakken sub-headline for results in the region.
Gulfport Energy Reports Results for Third Quarter
OKLAHOMA CITY, Nov 6, 2008 (GlobeNewswire via COMTEX) -- Gulfport Energy Corporation (GPOR) today reported financial and operating results for the third quarter of 2008.
For the third quarter of 2008, Gulfport reported net income of $14.1 million on revenues of $36.9 million, or $0.33 per diluted share. EBITDA (as defined below) for the third quarter of 2008 was $24.8 million. Cash flow from operating activities before changes in operating assets and liabilities was $23.9 million.
Production
Net production was 361,318 barrels of oil, 134,959 thousand cubic feet ("MCF") of natural gas and 16,540 barrels of natural gas liquids ("NGL"), or 400,351 barrels of oil equivalent ("BOE"), for the third quarter of 2008. Realized price, which includes transportation, for the quarter was $95.08 per barrel of oil, $9.91 per MCF of natural gas and $73.55 per barrel of NGL, or total equivalent of $92.19 per BOE.
In the third quarter of 2008, approximately 130,000 BOE of production was lost due to hurricane shut-ins. Less the impacts of the hurricanes, net production for the third quarter of 2008 would have been approximately 5,765 barrels of oil equivalent per day ("BOEPD").
Net production for the third quarter of 2008 by region was 318,101 BOE in Southern Louisiana, 63,632 BOE in the Permian Basin and 18,618 BOE in the Bakken.
Southern Louisiana
In Southern Louisiana, Gulfport has drilled eight wells at West Cote Blanche Bay ("WCBB") year-to-date. Of these eight wells, seven wells were completed as producers with one non-productive "Halo Well" drilled as a requirement to maintain acreage. Gulfport also performed nine recompletions at WCBB in the third quarter. From October 22 to November 4, 2008, WCBB produced for a fourteen-day average of 3,943 net BOEPD.
At Hackberry, all four wells drilled during the summer of 2008 have been completed and are strong producers. From October 22 to November 4, 2008, Hackberry produced for a fourteen-day average of 785 net BOEPD.
Gulfport's year-to-date drilling activity at WCBB and Hackberry combines for a 92% drilling success rate in Southern Louisiana.
Permian Basin
In the Permian Basin, 29 gross wells have been spud year-to-date. Of these 29 wells, 25 have been completed and fracture treated, with 14 of the completions being performed in September and October. One well is currently drilling while three wells are in various stages of completion. From October 22 to November 4, 2008, Gulfport's Permian assets produced for a fourteen-day average of 874 net BOEPD.
Bakken
Gulfport's acreage position in the Bakken has been expanded to 17,660 acres in the play, with approximately 26% located in Mountrail County. Year-to-date, Gulfport has participated, or committed to participate, in approximately 50 gross wells. Proposed working interests total approximately 1.3 net wells at a total cost of approximately $7.0 million as of October 31, 2008.
As previously reported, the Whitmore 1-6H reported an IP rate of 1,830 BOEPD from the Bakken formation in the Parshall area of Mountrail County, North Dakota. To date, cumulative production from this well is approximately 75,034 gross BOE for a 72 day period. Gulfport owns a 15.5% working interest in the well.
The Whitmore 1-7H tested at an IP rate of 2,205 BOEPD from the Bakken formation in the Parshall area of Mountrail County, North Dakota. To date, cumulative production from the well is approximately 30,865 gross BOE for a 21 day period. Gulfport owns a 3.9% working interest in the well.
Canadian Oil Sands
In Canada, Gulfport has an approximate 25% interest in Grizzly Oil Sands ("Grizzly"), a Canadian oil sands company. Grizzly holds the sixth largest land position in the Alberta oil sands with 511,765 net acres of oil sands leases, all of which are owned and operated by Grizzly (127,941 acres net to Gulfport). In the third quarter of 2008, Grizzly appointed John Pearce, formerly of Devon Canada, to the position of Chief Executive Officer. Mr. Pearce possesses a wealth of knowledge and experience in thermal heavy oil, having been responsible for lease selection, preliminary design, permitting, project management and operations engineering functions for the 35,000 barrel per day ("BPD") Jackfish project, currently in operation, as well as for the 35,000 BPD Jackfish 2 project, which recently received regulatory approval. Under the guidance of Mr. Pearce, Grizzly is moving forward with the permitting of its winter drilling program to begin in late 2008.
Management's Comments
Chief Executive Officer Jim Palm said, "At this point, we have an identified capital expenditure budget of $35 million in 2009 with approximately $5 million allocated to Grizzly and the remainder split evenly between Southern Louisiana and the Permian and Bakken. The Southern Louisiana budget will focus on recompletions. With this budget, we expect to produce in the range of approximately 1.9 to 2.1 million BOE and generate approximately $100 - $110 million of EBITDA at $70 WTI and $120 - $130 million of EBITDA at $90 WTI."
Presentation
An updated presentation has been posted to the Company's website. The presentation can be found at www.gulfportenergy.com under the "Webcasts and Presentations" section on the "Investor Relations" page. Information on the Company's website does not constitute a portion of this press release.
Conference Call
Gulfport will host a conference call today at 11:30 a.m. Central Time to discuss its third quarter 2008 financial and operational results. Interested parties may listen to the call via Gulfport's website at www.gulfportenergy.com or by calling 1-800-561-2601. International callers please dial 617-614-3518. The passcode for the conference call is 71843787. A replay of the call will be available for two weeks at 1-888-286-8010 or internationally at 617-801-6888. The replay passcode is 92578047. The webcast will be archived on the Company's website.
About Gulfport
Gulfport Energy Corporation is an Oklahoma City based independent oil and natural gas exploration and production company with its principal producing properties located along the Louisiana Gulf Coast and the Permian Basin in West Texas. Gulfport also holds a sizeable acreage position in the Alberta Oil Sands in Canada through its interest in Grizzly Oil Sands ULC. In addition, Gulfport is participating in numerous wells in the Bakken play in the Williston Basin in North Dakota.
Forward Looking Statements
This news release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements, other than statements of historical facts, included in this news release that address activities, events or developments that Gulfport expects or anticipates will or may occur in the future, including such things as future capital expenditures (including the amount and nature thereof), business strategy and measures to implement strategy, competitive strength, goals, expansion and growth of Gulfport's business and operations, plans, references to future success, reference to intentions as to future matters and other such matters are forward-looking statements. These statements are based on certain assumptions and analyses made by Gulfport in light of its experience and its perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances. However, whether actual results and developments will conform with Gulfport's expectations and predictions is subject to a number of risks and uncertainties, general economic, market or business conditions; the opportunities (or lack thereof) that may be presented to and pursued by Gulfport; competitive actions by other oil and gas companies; changes in laws or regulations; and other factors, many of which are beyond the control of Gulfport. Information concerning these and other factors can be found in the company's filings with the Securities and Exchange Commission, including its Forms 10-K, 10-Q and 8-K.
Consequently, all of the forward-looking statements made in this news release are qualified by these cautionary statements and there can be no assurances that the actual results or developments anticipated by Gulfport will be realized, or even if realized, that they will have the expected consequences to or effects on Gulfport, its business or operations. We have no intention, and disclaim any obligation, to update or revise any forward-looking statements, whether as a result of new information, future results or otherwise.
Non-GAAP Financial Measures
EBITDA is a non-GAAP financial measure equal to net income, the most directly comparable GAAP financial measure, plus interest expense, income tax expense, accretion expense and depreciation, depletion and amortization. Cash flow from operating activities before changes in operating assets and liabilities is a non-GAAP financial measure equal to cash flows from operating activities before changes in operating assets and liabilities. The Company has presented EBITDA because it uses EBITDA as an integral part of its internal reporting to measure its performance and to evaluate the performance of its senior management. EBITDA is considered an important indicator of the operational strength of the Company's business. EBITDA eliminates the uneven effect of considerable amounts of non-cash depletion, depreciation of tangible assets and amortization of certain intangible assets. A limitation of this measure, however, is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in the Company's businesses. Management evaluates the costs of such tangible and intangible assets and the impact of related impairments through other financial measures, such as capital expenditures, investment spending and return on capital. Therefore, the Company believes that EBITDA provides useful information to its investors regarding its performance and overall results of operations. EBITDA and cash flow from operating activities before changes in operating assets and liabilities are not intended to be performance measures that should be regarded as an alternative to, or more meaningful than, either net income as an indicator of operating performance or to cash flows from operating activities as a measure of liquidity. In addition, EBITDA and cash flow from operating activities before changes in operating assets and liabilities are not intended to represent funds available for dividends, reinvestment or other discretionary uses, and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. The EBITDA and cash flow from operating activities before changes in operating assets and liabilities presented in this press release may not be comparable to similarly titled measures presented by other companies, and may not be identical to corresponding measures used in the Company's various agreements.
GULFPORT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
2008 2007 2008 2007
----------- ----------- ----------- -----------
Revenues:
Gas sales $ 1,337,000 $ 1,500,000 $ 5,612,000 $ 3,993,000
Oil and
condensate
sales 34,354,000 28,472,000 95,636,000 71,360,000
Natural gas
liquids sales 1,216,000 -- 2,784,000 --
Other income
(expense) (176,000) 3,000 (381,000) 12,000
----------- ----------- ----------- -----------
36,731,000 29,975,000 103,651,000 75,365,000
----------- ----------- ----------- -----------
Costs and
expenses:
Lease
operating
expenses 6,362,000 4,008,000 14,906,000 11,127,000
Production
taxes 3,970,000 3,547,000 11,398,000 9,017,000
Depreciation,
depletion, and
amortization 9,392,000 7,845,000 28,912,000 20,128,000
General and
administrative 1,748,000 1,192,000 5,270,000 3,427,000
Accretion
expense 140,000 138,000 417,000 415,000
----------- ----------- ----------- -----------
21,612,000 16,730,000 60,903,000 44,114,000
----------- ----------- ----------- -----------
INCOME FROM
OPERATIONS: 15,119,000 13,245,000 42,748,000 31,251,000
----------- ----------- ----------- -----------
OTHER (INCOME)
EXPENSE:
Interest
expense 1,172,000 654,000 3,402,000 1,979,000
Insurance
proceeds -- -- (769,000) --
Interest
income (180,000) (114,000) (404,000) (343,000)
----------- ----------- ----------- -----------
992,000 540,000 2,229,000 1,636,000
----------- ----------- ----------- -----------
INCOME BEFORE
INCOME TAXES 14,127,000 12,705,000 40,519,000 29,615,000
INCOME TAX
EXPENSE: 20,000 4,000 20,000 57,000
----------- ----------- ----------- -----------
NET INCOME $14,107,000 $12,701,000 $40,499,000 $29,558,000
=========== =========== =========== ===========
NET INCOME PER
COMMON SHARE:
Basic $ 0.33 $ 0.34 $ 0.95 $ 0.82
=========== =========== =========== ===========
Diluted $ 0.33 $ 0.33 $ 0.94 $ 0.80
=========== =========== =========== ===========
Basic
weighted
average
shares
outstanding 42,620,332 37,671,681 42,589,277 36,048,327
Diluted
weighted
average
shares
outstanding 43,061,831 38,350,214 43,061,383 36,721,743
Gulfport Energy Corporation
Reconciliation of EBITDA and Cash Flow
(Unaudited)
Three Months Ended Nine Months Ended
------------------------ -------------------------
September 30, September 30,
------------------------ -------------------------
2008 2007 2008 2007
----------- ----------- ----------- -----------
Net Income $14,107,000 $12,701,000 $40,499,000 $29,558,000
Interest
expense 1,172,000 654,000 3,402,000 1,979,000
Income tax
expense 20,000 4,000 20,000 57,000
Accretion
expense 140,000 138,000 417,000 415,000
Depreciation,
depletion,
and
amortization 9,392,000 7,845,000 28,912,000 20,128,000
----------- ----------- ----------- -----------
EBITDA $24,831,000 $21,342,000 $73,250,000 $52,137,000
=========== =========== =========== ===========
Three Months Ended Nine Months Ended
------------------------ -------------------------
September 30, September 30,
------------------------ -------------------------
2008 2007 2008 2007
----------- ----------- ----------- -----------
Cash provided
by operating
activity $29,547,000 $21,413,000 $75,263,000 $47,236,000
Adjustments:
Changes in
operating
assets and
liabilities (5,678,000) (468,000) (4,695,000) 3,613,000
----------- ----------- ----------- -----------
Operating
Cash Flow $23,869,000 $20,945,000 $70,568,000 $50,849,000
----------- ----------- ----------- -----------
Gulfport Energy Corporation
Production Schedule
(Unaudited)
Production Volumes: 3Q2008 3Q2007 YTD 2008 YTD 2007
Oil (MBbls) 361.3 404.1 1,131.8 1,115.6
Gas (MMcf) 135.0 218.1 559.0 531.5
NGL (Gal) 694.7 -- 1,804.6 --
Oil Equivalents (MBOE) 400.4 440.4 1,267.9 1,204.2
Average Realized Price:
Oil (per Bbl) $95.08 $70.46 $84.50 $63.97
Gas (per Mcf) $9.91 $6.88 $10.04 $7.51
NGL (per Gal) $1.75 $0.00 $1.54 $0.00
Oil Equivalents (BOE) $92.19 $68.05 $82.05 $62.58
This news release was distributed by GlobeNewswire, www.globenewswire.com
SOURCE: Gulfport Energy Corporation
Gulfport Energy Corporation
Investor & Media Contact:
Paul K. Heerwagen, Investor Relations
405-242-4888
pheerwagen@gulfportenergy.com
(C) Copyright 2008 GlobeNewswire, Inc. All rights reserved.
For the third quarter of 2008, Gulfport reported net income of $14.1 million on revenues of $36.9 million, or $0.33 per diluted share. EBITDA (as defined below) for the third quarter of 2008 was $24.8 million. Cash flow from operating activities before changes in operating assets and liabilities was $23.9 million.
Production
Net production was 361,318 barrels of oil, 134,959 thousand cubic feet ("MCF") of natural gas and 16,540 barrels of natural gas liquids ("NGL"), or 400,351 barrels of oil equivalent ("BOE"), for the third quarter of 2008. Realized price, which includes transportation, for the quarter was $95.08 per barrel of oil, $9.91 per MCF of natural gas and $73.55 per barrel of NGL, or total equivalent of $92.19 per BOE.
In the third quarter of 2008, approximately 130,000 BOE of production was lost due to hurricane shut-ins. Less the impacts of the hurricanes, net production for the third quarter of 2008 would have been approximately 5,765 barrels of oil equivalent per day ("BOEPD").
Net production for the third quarter of 2008 by region was 318,101 BOE in Southern Louisiana, 63,632 BOE in the Permian Basin and 18,618 BOE in the Bakken.
Southern Louisiana
In Southern Louisiana, Gulfport has drilled eight wells at West Cote Blanche Bay ("WCBB") year-to-date. Of these eight wells, seven wells were completed as producers with one non-productive "Halo Well" drilled as a requirement to maintain acreage. Gulfport also performed nine recompletions at WCBB in the third quarter. From October 22 to November 4, 2008, WCBB produced for a fourteen-day average of 3,943 net BOEPD.
At Hackberry, all four wells drilled during the summer of 2008 have been completed and are strong producers. From October 22 to November 4, 2008, Hackberry produced for a fourteen-day average of 785 net BOEPD.
Gulfport's year-to-date drilling activity at WCBB and Hackberry combines for a 92% drilling success rate in Southern Louisiana.
Permian Basin
In the Permian Basin, 29 gross wells have been spud year-to-date. Of these 29 wells, 25 have been completed and fracture treated, with 14 of the completions being performed in September and October. One well is currently drilling while three wells are in various stages of completion. From October 22 to November 4, 2008, Gulfport's Permian assets produced for a fourteen-day average of 874 net BOEPD.
Bakken
Gulfport's acreage position in the Bakken has been expanded to 17,660 acres in the play, with approximately 26% located in Mountrail County. Year-to-date, Gulfport has participated, or committed to participate, in approximately 50 gross wells. Proposed working interests total approximately 1.3 net wells at a total cost of approximately $7.0 million as of October 31, 2008.
As previously reported, the Whitmore 1-6H reported an IP rate of 1,830 BOEPD from the Bakken formation in the Parshall area of Mountrail County, North Dakota. To date, cumulative production from this well is approximately 75,034 gross BOE for a 72 day period. Gulfport owns a 15.5% working interest in the well.
The Whitmore 1-7H tested at an IP rate of 2,205 BOEPD from the Bakken formation in the Parshall area of Mountrail County, North Dakota. To date, cumulative production from the well is approximately 30,865 gross BOE for a 21 day period. Gulfport owns a 3.9% working interest in the well.
Canadian Oil Sands
In Canada, Gulfport has an approximate 25% interest in Grizzly Oil Sands ("Grizzly"), a Canadian oil sands company. Grizzly holds the sixth largest land position in the Alberta oil sands with 511,765 net acres of oil sands leases, all of which are owned and operated by Grizzly (127,941 acres net to Gulfport). In the third quarter of 2008, Grizzly appointed John Pearce, formerly of Devon Canada, to the position of Chief Executive Officer. Mr. Pearce possesses a wealth of knowledge and experience in thermal heavy oil, having been responsible for lease selection, preliminary design, permitting, project management and operations engineering functions for the 35,000 barrel per day ("BPD") Jackfish project, currently in operation, as well as for the 35,000 BPD Jackfish 2 project, which recently received regulatory approval. Under the guidance of Mr. Pearce, Grizzly is moving forward with the permitting of its winter drilling program to begin in late 2008.
Management's Comments
Chief Executive Officer Jim Palm said, "At this point, we have an identified capital expenditure budget of $35 million in 2009 with approximately $5 million allocated to Grizzly and the remainder split evenly between Southern Louisiana and the Permian and Bakken. The Southern Louisiana budget will focus on recompletions. With this budget, we expect to produce in the range of approximately 1.9 to 2.1 million BOE and generate approximately $100 - $110 million of EBITDA at $70 WTI and $120 - $130 million of EBITDA at $90 WTI."
Presentation
An updated presentation has been posted to the Company's website. The presentation can be found at www.gulfportenergy.com under the "Webcasts and Presentations" section on the "Investor Relations" page. Information on the Company's website does not constitute a portion of this press release.
Conference Call
Gulfport will host a conference call today at 11:30 a.m. Central Time to discuss its third quarter 2008 financial and operational results. Interested parties may listen to the call via Gulfport's website at www.gulfportenergy.com or by calling 1-800-561-2601. International callers please dial 617-614-3518. The passcode for the conference call is 71843787. A replay of the call will be available for two weeks at 1-888-286-8010 or internationally at 617-801-6888. The replay passcode is 92578047. The webcast will be archived on the Company's website.
About Gulfport
Gulfport Energy Corporation is an Oklahoma City based independent oil and natural gas exploration and production company with its principal producing properties located along the Louisiana Gulf Coast and the Permian Basin in West Texas. Gulfport also holds a sizeable acreage position in the Alberta Oil Sands in Canada through its interest in Grizzly Oil Sands ULC. In addition, Gulfport is participating in numerous wells in the Bakken play in the Williston Basin in North Dakota.
Forward Looking Statements
This news release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements, other than statements of historical facts, included in this news release that address activities, events or developments that Gulfport expects or anticipates will or may occur in the future, including such things as future capital expenditures (including the amount and nature thereof), business strategy and measures to implement strategy, competitive strength, goals, expansion and growth of Gulfport's business and operations, plans, references to future success, reference to intentions as to future matters and other such matters are forward-looking statements. These statements are based on certain assumptions and analyses made by Gulfport in light of its experience and its perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances. However, whether actual results and developments will conform with Gulfport's expectations and predictions is subject to a number of risks and uncertainties, general economic, market or business conditions; the opportunities (or lack thereof) that may be presented to and pursued by Gulfport; competitive actions by other oil and gas companies; changes in laws or regulations; and other factors, many of which are beyond the control of Gulfport. Information concerning these and other factors can be found in the company's filings with the Securities and Exchange Commission, including its Forms 10-K, 10-Q and 8-K.
Consequently, all of the forward-looking statements made in this news release are qualified by these cautionary statements and there can be no assurances that the actual results or developments anticipated by Gulfport will be realized, or even if realized, that they will have the expected consequences to or effects on Gulfport, its business or operations. We have no intention, and disclaim any obligation, to update or revise any forward-looking statements, whether as a result of new information, future results or otherwise.
Non-GAAP Financial Measures
EBITDA is a non-GAAP financial measure equal to net income, the most directly comparable GAAP financial measure, plus interest expense, income tax expense, accretion expense and depreciation, depletion and amortization. Cash flow from operating activities before changes in operating assets and liabilities is a non-GAAP financial measure equal to cash flows from operating activities before changes in operating assets and liabilities. The Company has presented EBITDA because it uses EBITDA as an integral part of its internal reporting to measure its performance and to evaluate the performance of its senior management. EBITDA is considered an important indicator of the operational strength of the Company's business. EBITDA eliminates the uneven effect of considerable amounts of non-cash depletion, depreciation of tangible assets and amortization of certain intangible assets. A limitation of this measure, however, is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in the Company's businesses. Management evaluates the costs of such tangible and intangible assets and the impact of related impairments through other financial measures, such as capital expenditures, investment spending and return on capital. Therefore, the Company believes that EBITDA provides useful information to its investors regarding its performance and overall results of operations. EBITDA and cash flow from operating activities before changes in operating assets and liabilities are not intended to be performance measures that should be regarded as an alternative to, or more meaningful than, either net income as an indicator of operating performance or to cash flows from operating activities as a measure of liquidity. In addition, EBITDA and cash flow from operating activities before changes in operating assets and liabilities are not intended to represent funds available for dividends, reinvestment or other discretionary uses, and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. The EBITDA and cash flow from operating activities before changes in operating assets and liabilities presented in this press release may not be comparable to similarly titled measures presented by other companies, and may not be identical to corresponding measures used in the Company's various agreements.
GULFPORT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
2008 2007 2008 2007
----------- ----------- ----------- -----------
Revenues:
Gas sales $ 1,337,000 $ 1,500,000 $ 5,612,000 $ 3,993,000
Oil and
condensate
sales 34,354,000 28,472,000 95,636,000 71,360,000
Natural gas
liquids sales 1,216,000 -- 2,784,000 --
Other income
(expense) (176,000) 3,000 (381,000) 12,000
----------- ----------- ----------- -----------
36,731,000 29,975,000 103,651,000 75,365,000
----------- ----------- ----------- -----------
Costs and
expenses:
Lease
operating
expenses 6,362,000 4,008,000 14,906,000 11,127,000
Production
taxes 3,970,000 3,547,000 11,398,000 9,017,000
Depreciation,
depletion, and
amortization 9,392,000 7,845,000 28,912,000 20,128,000
General and
administrative 1,748,000 1,192,000 5,270,000 3,427,000
Accretion
expense 140,000 138,000 417,000 415,000
----------- ----------- ----------- -----------
21,612,000 16,730,000 60,903,000 44,114,000
----------- ----------- ----------- -----------
INCOME FROM
OPERATIONS: 15,119,000 13,245,000 42,748,000 31,251,000
----------- ----------- ----------- -----------
OTHER (INCOME)
EXPENSE:
Interest
expense 1,172,000 654,000 3,402,000 1,979,000
Insurance
proceeds -- -- (769,000) --
Interest
income (180,000) (114,000) (404,000) (343,000)
----------- ----------- ----------- -----------
992,000 540,000 2,229,000 1,636,000
----------- ----------- ----------- -----------
INCOME BEFORE
INCOME TAXES 14,127,000 12,705,000 40,519,000 29,615,000
INCOME TAX
EXPENSE: 20,000 4,000 20,000 57,000
----------- ----------- ----------- -----------
NET INCOME $14,107,000 $12,701,000 $40,499,000 $29,558,000
=========== =========== =========== ===========
NET INCOME PER
COMMON SHARE:
Basic $ 0.33 $ 0.34 $ 0.95 $ 0.82
=========== =========== =========== ===========
Diluted $ 0.33 $ 0.33 $ 0.94 $ 0.80
=========== =========== =========== ===========
Basic
weighted
average
shares
outstanding 42,620,332 37,671,681 42,589,277 36,048,327
Diluted
weighted
average
shares
outstanding 43,061,831 38,350,214 43,061,383 36,721,743
Gulfport Energy Corporation
Reconciliation of EBITDA and Cash Flow
(Unaudited)
Three Months Ended Nine Months Ended
------------------------ -------------------------
September 30, September 30,
------------------------ -------------------------
2008 2007 2008 2007
----------- ----------- ----------- -----------
Net Income $14,107,000 $12,701,000 $40,499,000 $29,558,000
Interest
expense 1,172,000 654,000 3,402,000 1,979,000
Income tax
expense 20,000 4,000 20,000 57,000
Accretion
expense 140,000 138,000 417,000 415,000
Depreciation,
depletion,
and
amortization 9,392,000 7,845,000 28,912,000 20,128,000
----------- ----------- ----------- -----------
EBITDA $24,831,000 $21,342,000 $73,250,000 $52,137,000
=========== =========== =========== ===========
Three Months Ended Nine Months Ended
------------------------ -------------------------
September 30, September 30,
------------------------ -------------------------
2008 2007 2008 2007
----------- ----------- ----------- -----------
Cash provided
by operating
activity $29,547,000 $21,413,000 $75,263,000 $47,236,000
Adjustments:
Changes in
operating
assets and
liabilities (5,678,000) (468,000) (4,695,000) 3,613,000
----------- ----------- ----------- -----------
Operating
Cash Flow $23,869,000 $20,945,000 $70,568,000 $50,849,000
----------- ----------- ----------- -----------
Gulfport Energy Corporation
Production Schedule
(Unaudited)
Production Volumes: 3Q2008 3Q2007 YTD 2008 YTD 2007
Oil (MBbls) 361.3 404.1 1,131.8 1,115.6
Gas (MMcf) 135.0 218.1 559.0 531.5
NGL (Gal) 694.7 -- 1,804.6 --
Oil Equivalents (MBOE) 400.4 440.4 1,267.9 1,204.2
Average Realized Price:
Oil (per Bbl) $95.08 $70.46 $84.50 $63.97
Gas (per Mcf) $9.91 $6.88 $10.04 $7.51
NGL (per Gal) $1.75 $0.00 $1.54 $0.00
Oil Equivalents (BOE) $92.19 $68.05 $82.05 $62.58
This news release was distributed by GlobeNewswire, www.globenewswire.com
SOURCE: Gulfport Energy Corporation
Gulfport Energy Corporation
Investor & Media Contact:
Paul K. Heerwagen, Investor Relations
405-242-4888
pheerwagen@gulfportenergy.com
(C) Copyright 2008 GlobeNewswire, Inc. All rights reserved.
Nordic American Tanker Exceeds Earnings Expectations
Nordic American Tanker (nyse:NAT) exceeded earnings expectations, beating the market's estimate of $1.22 a share by 2 cents, coming in at $1.24 a share for the third quarter.
Earnings for the quarter surged to $42.7 million, in sharp contrast to the $1.2 million loss, or 4 cents a share suffered in the third quarter of 2007.
The success of the company for the quarter is because of their Suezmax tankers, which far outperformed expectations on the spot market, bringing in a day rate average of $68,362 a vessel, far above the expected average of $64,000 a vessel.
Suezmax tankers refers to the largest vessels able to travel through the Suez canal.
While the spot market offers risk to the company, it has been very good to Nordic recently, and according to company executives, is still outperforming in the fourth quarter.
Rates for the fourth quarter per vessel are over $55,000 on average, and trading at $65,000 a day. This is far above the $40,000 some analysts are looking for during the current quarter.
Some analaysts are looking for $37,000 for Suezmaxes for 2009. If that were to come about, it would put downward pressure on Nordic, as eleven out of twelve of their Suezmax vessels cater to the spot market. Only one is on a long-term fixed rate charter.
Earnings for the quarter surged to $42.7 million, in sharp contrast to the $1.2 million loss, or 4 cents a share suffered in the third quarter of 2007.
The success of the company for the quarter is because of their Suezmax tankers, which far outperformed expectations on the spot market, bringing in a day rate average of $68,362 a vessel, far above the expected average of $64,000 a vessel.
Suezmax tankers refers to the largest vessels able to travel through the Suez canal.
While the spot market offers risk to the company, it has been very good to Nordic recently, and according to company executives, is still outperforming in the fourth quarter.
Rates for the fourth quarter per vessel are over $55,000 on average, and trading at $65,000 a day. This is far above the $40,000 some analysts are looking for during the current quarter.
Some analaysts are looking for $37,000 for Suezmaxes for 2009. If that were to come about, it would put downward pressure on Nordic, as eleven out of twelve of their Suezmax vessels cater to the spot market. Only one is on a long-term fixed rate charter.
Will Global Oil Demand Contract in 2009?
A number of energy analysts are asserting that global oil demand for 2009 will contract for the first time in 26 years.
If this were to happen, it would pretty much depend upon the depth the economic crisis goes and reaches.
The major emerging market economies (BRIC) are expected to decline in growth from between 2 percent to 3.5 percent, but will still remain in the positive, if projections are accurate.
More significant as far as oil contraction goes, is whether demand in the U.S. can fall to the point where it becomes a factor. with oil and gas prices falling so much in the recent months, it's difficult to see this continuing to the point of it going into negative territory.
Still, it's unknown at this time how deep the economic crisis will go, and there is definitely the possibility oil demand could contract with BRIC slowing down.
It remains to be seen if the increase in domestic gasoline demand in the U.S. last week is an anamoly, or if it's the beginning of increased use.
If this were to happen, it would pretty much depend upon the depth the economic crisis goes and reaches.
The major emerging market economies (BRIC) are expected to decline in growth from between 2 percent to 3.5 percent, but will still remain in the positive, if projections are accurate.
More significant as far as oil contraction goes, is whether demand in the U.S. can fall to the point where it becomes a factor. with oil and gas prices falling so much in the recent months, it's difficult to see this continuing to the point of it going into negative territory.
Still, it's unknown at this time how deep the economic crisis will go, and there is definitely the possibility oil demand could contract with BRIC slowing down.
It remains to be seen if the increase in domestic gasoline demand in the U.S. last week is an anamoly, or if it's the beginning of increased use.
Saturday, November 8, 2008
Bids for Oil Exploration off Norway Coastline Soar
The Norwegian government says the number of oil companies bidding for exploration licenses off its coastlines has surged to a record 46 in the country's latest licensing round. That's over double the last bidding round in 2005 when 19 companies participated.
With a number of its North Sea fields aging, Norway is hoping that new offshore oil deposits will be found by directing exploration north of the current fields. New licenses for blocks are being offered in the Barents Sea and Norwegian Sea.
"It is positive that this many companies want to aim towards new opportunities in the Barents Sea and the Norwegian Sea," said Oil Minister Terje Riis-Johansen. "Petroleum activities that are undertaken in accordance with important environmental and fisheries concerns can make a significant impact on employment, industrial development and value creation in the northern areas."
Now that oil production has started to drop in the Scandinavian country, Norway has opened bids up to smaller oil companies to generate more interest. Larger companies have generally started to stay away from the declining area as production has dropped from over 3 million barrels a day in 2000 to 2.2 million barrels a day.
The renewed interest in the area comes from higher crude prices.
Bids on the new blocks will be awarded sometime early or mid-2009.
With a number of its North Sea fields aging, Norway is hoping that new offshore oil deposits will be found by directing exploration north of the current fields. New licenses for blocks are being offered in the Barents Sea and Norwegian Sea.
"It is positive that this many companies want to aim towards new opportunities in the Barents Sea and the Norwegian Sea," said Oil Minister Terje Riis-Johansen. "Petroleum activities that are undertaken in accordance with important environmental and fisheries concerns can make a significant impact on employment, industrial development and value creation in the northern areas."
Now that oil production has started to drop in the Scandinavian country, Norway has opened bids up to smaller oil companies to generate more interest. Larger companies have generally started to stay away from the declining area as production has dropped from over 3 million barrels a day in 2000 to 2.2 million barrels a day.
The renewed interest in the area comes from higher crude prices.
Bids on the new blocks will be awarded sometime early or mid-2009.
Thursday, November 6, 2008
Weak Economy Continues to Put Downward Pressure on Oil Prices
Prices for oil dropped to near $60 a barrel Thursday, the lowest level in close to a year and a half.
With growing consensus showing we will be in for a long economic downturn, consumers are cutting back on everything but buying necessities, drying up oil demand.
The obvious effect of this is also to push gas prices down with oil, and that has many experts saying that could result in gas falling to $2 a gallon by the end of 2008. The AAA says overnight gas prices fell to $2.34 a gallon on average.
In just the last month average prices of gasoline have declined by close to 33 percent in the U.S.
Oil for December delivery settled at $60.77 a barrel on the New York Mercantile Exchange, a drop of $4.53 or 7 percent.
Brent Crude on the ICE Futures exchange in London fell $4.44, to settle at $57.43 for December delivery.
With growing consensus showing we will be in for a long economic downturn, consumers are cutting back on everything but buying necessities, drying up oil demand.
The obvious effect of this is also to push gas prices down with oil, and that has many experts saying that could result in gas falling to $2 a gallon by the end of 2008. The AAA says overnight gas prices fell to $2.34 a gallon on average.
In just the last month average prices of gasoline have declined by close to 33 percent in the U.S.
Oil for December delivery settled at $60.77 a barrel on the New York Mercantile Exchange, a drop of $4.53 or 7 percent.
Brent Crude on the ICE Futures exchange in London fell $4.44, to settle at $57.43 for December delivery.
Monday, November 3, 2008
Oil Falls Almost 6 Percent Monday, as Demand Drives Prices Down
OPEC, other oil producers and oil companies, at this time must sit on the sidelines and watch, as oil prices are being driven by only one thing at this time, and that is demand; and demand is continuing to decline.
What is driving demand is fears of consumers on the condition of the economy, and that has them holding their cash close to their chests.
Confirming this even more was the level of factory activity in the U.S., which has been the key indicator on the demand for oil. That dropped sharply in October, down to its lowest levels in 26 years.
With the Institute for Supply Management saying factory activity in the U.S. dropped to 38.9 for October, it underscored the deep cutbacks experienced in the sector. Anything under 40 is considered a very weak performance. The month of September came in at 43.5.
For the last several weeks, U.S. demand for oil has fallen off by about 2 million barrels a day.
Crude in the U.S. fell 6 percent to $63.91 a barrel, a drop of $3.90. London Brent Crude fell even more, finishing the session at $60.49 a barrel, a decline of $4.84 a barrel.
What is driving demand is fears of consumers on the condition of the economy, and that has them holding their cash close to their chests.
Confirming this even more was the level of factory activity in the U.S., which has been the key indicator on the demand for oil. That dropped sharply in October, down to its lowest levels in 26 years.
With the Institute for Supply Management saying factory activity in the U.S. dropped to 38.9 for October, it underscored the deep cutbacks experienced in the sector. Anything under 40 is considered a very weak performance. The month of September came in at 43.5.
For the last several weeks, U.S. demand for oil has fallen off by about 2 million barrels a day.
Crude in the U.S. fell 6 percent to $63.91 a barrel, a drop of $3.90. London Brent Crude fell even more, finishing the session at $60.49 a barrel, a decline of $4.84 a barrel.
More Oil Found at Campos Basin Off Brazil's Coast
The potentially huge depository of oil at the Campos Basin off of Brazil's Coast has yielded more oil, as partners in the venture, EnCana Corp., SK Energy Co., Anadarko Petroleum Corp. and Devon Energy Corp. discovered more at the huge site.
The new oil was found at a well called the 1APL1ESS in the C-M-101 block in water 1,418 meters (4,652 feet) deep.
With oil prices down, it's not known if the available oil can be produced at a profit at this time.
The new oil was found at a well called the 1APL1ESS in the C-M-101 block in water 1,418 meters (4,652 feet) deep.
With oil prices down, it's not known if the available oil can be produced at a profit at this time.
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