November 8, 2010

RAM Energy Resources Reports Third Quarter 2010 Results

  • RAM Reports 3Q 2010 Net Income of $1.6 million, or $0.02 per share; 9 Months Net Income of $6.7 million, or $0.09 per share
  • 3Q 2010 Free Cash Flow of $7.5 Million, or $0.10 Per Share
  • 3Q 2010 Modified EBITDA of $12.0 Million
  • 3Q 2010 Production of 541,000 BOE; 9 Months Production of 1.7 Million BOE
  • RAM announces Agreement to Sell North Texas Gas Assets; Proceeds Target Debt Reduction

TULSA, Okla., Nov 08, 2010 (BUSINESS WIRE) -- RAM Energy Resources, Inc. (Nasdaq: RAME) today announced third quarter 2010 earnings and financial highlights.

RAM Reports 3Q 2010 Net Income of $1.6 Million

For the quarter ended September 30, 2010, RAM reported net income of $1.6 million, or $0.02 per share, based on 78.6 million diluted weighted average shares outstanding compared to a loss of $3.1 million, or $0.04 a share, on 74.5 million shares outstanding in the year-ago quarter. For the third quarter 2010, RAM's adjusted net income to common shareholders (a non-GAAP measure) was $444,000, or $0.01 per share. The calculation of adjusted net income excludes the after tax impact of unrealized, non-cash, mark-to-market (MTM) gains associated with oil and natural gas derivatives covering future periods and other items. The adjusted net loss for the third quarter 2009 was $2.3 million, or $0.03 per share.

Modified EBITDA and Free Cash Flow

Modified EBITDA (a non-GAAP measure) was $12.0 million for the third quarter, compared with $11.1 million in last year's quarter. Similarly, free cash flow (a non-GAAP measure) was $7.5 million, or $0.10 per share, for this year's third quarter compared to $8.7 million, or $0.12 per share, in last year's third quarter.

Commodity Prices and Revenues

Third quarter production totaled 541 thousand barrel of oil equivalents (BOE), down marginally from second quarter 2010 production of 549 thousand BOE, principally the result of natural production declines and offline wells resulting from weather related disruptions in the second quarter. Although offline wells were gradually returned to production, the timing and impact were insufficient to offset natural declines. Further, RAM experienced a shortage of fracturing and stimulation crews and equipment which continued to delay initiation of production from wells drilled in South Texas and hampered planned efforts to offset the natural decline in production. Third quarter 2010 production was down 14% compared to the 630 thousand BOE in the third quarter 2009.

The company's realized price for oil increased 13% to an average of $74.05 per barrel in the third quarter of 2010 compared with last year's third quarter average realized price of $65.74 per barrel. Similarly, the company's realized price for natural gas rose 31% to an average of $4.05 per thousand cubic feet (Mcf) compared to an average of $3.10 per Mcf in the third quarter of 2009. In addition, the price of NGLs grew 24%, averaging $35.71 per barrel for this year's third quarter. The positive impact from the 19% increase in total average price per BOE in the third quarter of 2010 was sufficient to fully offset the impact of the decline in production, allowing oil and gas revenue for the third quarter to rise to $26.5 million, compared to $25.9 million in the year-ago third quarter.

Derivative activity resulted in a net $569,000 gain in the third quarter 2010 and was comprised of realized losses from contract settlements and premium costs of $1.2 million and offsetting unrealized MTM gains of $1.8 million. As a result, total revenues for the quarter rose to $27.1 million. Derivative activity in last year's third quarter totaled a net loss of $800,000, as the combination of $483,000 of realized gains was more than offset by unrealized losses of $1.3 million. These net derivative losses effectively reduced total revenues to $25.1 million in last year's third quarter.

Costs and Expenses

Production expenses were $8.6 million in the third quarter of 2010, 12% below the $9.8 million in the previous year's quarter due primarily to decreased production volumes in the 2010 period and lower chemical costs. Production taxes were $1.5 million in this year's third quarter, up 15% compared to production taxes of $1.3 million in the same quarter last year, primarily due to higher hydrocarbon prices during 2010. General and administrative expenses were $2.9 million in the current quarter, a 31% decline compared to $4.2 million in last year's third quarter and a testament to the company's continuing cost containment efforts.

Proceeds From Asset Sale Target Debt Reduction

Consistent with RAM's stated objective to deleverage the company through targeted asset sales, on November 1, 2010 the company announced it had signed an agreement effecting the strategic divestiture of RAM's North Texas Barnett Shale and Boonsville properties to a private E&P company for $43.75 million in cash. Proceeds from the transaction, which is anticipated to close in early December 2010, are aimed at reducing its outstanding balances of debt. Concomitantly, RAM is evaluating alternatives for the refinancing the company's remaining debt.

As of September 30, 2010, RAM's outstanding borrowings under its credit facility totaled $246.8 million, of which term debt was $113.3 million and $133.5 million was drawn on its revolver, which is currently subject to a $165.0 million borrowing base. Outstanding borrowings under the facility at September 30, 2009 totaled $250.2 million.

Interest expense for the third quarter 2010 was $5.8 million compared to $5.6 million in the year-ago quarter. Similarly, the blended interest rate on borrowings was 8.2% in the third quarter compared to the blended rate in last year's quarter of 8.9%. The increase in interest expense was due to higher average outstanding borrowings throughout the 2010 period.

Nine Month 2010 Results

Nine month production totaled 1.7 million BOE, down 15% from production in the nine months of 2009 of 1.9 million BOE, resulting primarily from weather-related interruptions in both the first and second quarters of 2010 and natural production declines. In addition, the continued shortage of fracturing and stimulation crews and equipment which delayed bringing South Texas wells online hampered planned efforts to offset natural declines. Net income for the nine months ended September 30, 2010 was $6.7 million, or $0.09 per share compared to a loss of $45.8 million, or a loss of $0.61 per share, in the year-ago period. Modified EBITDA (a non-GAAP measure) was $40.2 million for the nine months of 2010 compared to $43.2 million for the same period last year. Free cash flow (a non-GAAP measure) for the first nine months of 2010 was $26.0 million, or $0.33 per share, compared to $33.7 million, or $0.45 per share, for the same period last year.

RAM to Webcast Third Quarter 2010 Conference Call

The company's teleconference call to review third quarter results will be broadcast live on a listen-only basis over the internet on Monday, November 8 at 11 a.m. Eastern Time. Interested parties may access the webcast by visiting the RAM Energy Resources, Inc. website at www.ramenergy.com. From the home page, select the Investor Relations tab and then click on the microphone icon. The teleconference may be accessed by dialing 800.901.5241 (domestic) or 617.786.2963 (international) and providing the call identifier "37071790" to the operator. The webcast will be available for replay on the company's website following the call's completion. An audio replay will be available until November 15, 2010 by dialing 888.286.8010 (domestic) or 617.801.6888 (international) and using pass code "48125977".

Forward-Looking Statements

This release includes certain statements that may be deemed to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements in this release, other than statements of historical facts, which address targets or plans for borrowing availability, and events or developments that the company expects or believes, are forward-looking statements. Although the company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include oil and gas prices, exploitation and exploration successes, actions taken and to be taken by the government as a result of political and economic conditions, continued availability of capital and financing, and general economic, market or business conditions as well as other risk factors described from time to time in the company's filings with the SEC. The company assumes no obligation to update publicly such forward-looking statements, whether as a result of new information, future events or otherwise.

About RAM Energy

RAM Energy Resources, Inc. is an independent energy company engaged in the acquisition, exploitation, exploration, and development of oil and natural gas properties and the marketing of crude oil and natural gas. Company headquarters are in Tulsa, Oklahoma, and its common shares are traded on the Nasdaq under the symbol RAME. For additional information, visit the company website at www.ramenergy.com.

RAM Energy Resources, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)

             
      September 30,     December 31,
      2010     2009
      (unaudited)      
ASSETS            
CURRENT ASSETS:            
Cash and cash equivalents     $ 29       $ 129  
Accounts receivable:            
Oil and natural gas sales, net of allowance of $50 ($50 at December 31, 2009)       9,844         12,585  
Joint interest operations, net of allowance of $479 ($641 at December 31, 2009)       547         1,303  
Income taxes       119         -  
Other, net of allowance of $48 ($48 at December 31, 2009)       754         193  
Derivative assets       2,385         -  
Prepaid expenses       1,027         1,970  
Deferred tax asset       3,976         3,531  
Inventory       3,372         3,900  
Other current assets       911         27  
Total current assets       22,964         23,638  
PROPERTIES AND EQUIPMENT, AT COST:            
Proved oil and natural gas properties and equipment, using full cost accounting       729,441         702,502  
Other property and equipment       9,928         9,337  
        739,369         711,839  
Less accumulated depreciation, amortization and impairment       (482,797 )       (462,541 )
Total properties and equipment       256,572         249,298  
OTHER ASSETS:            
Deferred tax asset       32,061         31,573  
Derivative assets       383         -  
Deferred loan costs, net of accumulated amortization of $4,490 ($2,924 at December 31, 2009)       3,131         4,697  
Other       946         1,956  
Total assets     $ 316,057       $ 311,162  
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)            
CURRENT LIABILITIES:            
Accounts payable:            
Trade     $ 18,335       $ 15,697  
Oil and natural gas proceeds due others       9,638         10,113  
Other       80         636  
Accrued liabilities:            
Compensation       1,230         2,664  
Interest       2,650         2,933  
Income taxes       182         655  
Other       336         10  
Derivative liabilities       -         4,471  
Asset retirement obligations       731         711  
Long-term debt due within one year       124         126  
Total current liabilities       33,306         38,016  
DERIVATIVE LIABILITIES       -         358  
LONG-TERM DEBT       247,012         246,041  
ASSET RETIREMENT OBLIGATIONS       27,617         26,363  
OTHER LONG-TERM LIABILITIES       10         10  
COMMITMENTS AND CONTINGENCIES       -         900  
             
STOCKHOLDERS' EQUITY (DEFICIT):            
Common stock, $0.0001 par value, 100,000,000 shares authorized, 82,597,829 and 80,748,674 shares issued,            
78,636,524 and 76,951,883 shares outstanding at September 30, 2010 and December 31, 2009, respectively       8         8  
Additional paid-in capital       225,237         222,979  
Treasury stock - 3,961,305 shares (3,796,791 shares at December 31,2009) at cost       (6,520 )       (6,189 )
Accumulated deficit       (210,613 )       (217,324 )
Stockholders' equity (deficit)       8,112         (526 )
Total liabilities and stockholders' equity (deficit)     $ 316,057       $ 311,162  
           

RAM Energy Resources, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share amounts)
(unaudited)

           
      Three months ended September 30,  

Nine months ended September 30,

      2010   2009     2010   2009
REVENUES AND OTHER OPERATING INCOME:                    
Oil and natural gas sales                    
Oil     $ 18,290     $ 18,276       $ 56,898     $ 45,740  
Natural gas       4,923       4,607         16,170       15,564  
NGLs       3,250       2,999         10,461       7,134  
Total oil and natural gas sales       26,463       25,882         83,529       68,438  
Realized gains (losses) on derivatives       (1,213 )     483         (2,818 )     19,032  
Unrealized gains (losses) on derivatives       1,782       (1,283 )       6,136       (26,085 )
Other       51       49         125       177  
Total revenues and other operating income       27,083       25,131         86,972       61,562  
                     
OPERATING EXPENSES:                    
Oil and natural gas production taxes       1,518       1,320         4,565       3,119  
Oil and natural gas production expenses       8,571       9,772         25,153       28,976  
Depreciation and amortization       6,782       7,909         20,387       24,377  
Accretion expense       452       513         1,288       1,449  
Impairment       -       -         -       47,613  
Share-based compensation       813       539         2,284       1,632  
General and administrative, overhead and other expenses, net of                    
operator's overhead fees       2,932       4,247         10,694       12,337  
Total operating expenses       21,068       24,300         64,371       119,503  
Operating income (loss)       6,015       831         22,601       (57,941 )
                     
OTHER INCOME (EXPENSE):                    
Interest expense       (5,767 )     (5,561 )       (17,116 )     (12,770 )
Interest income       20       40         24       69  
Other income (expense)       (268 )     10         293       (529 )
EARNINGS (LOSS) BEFORE INCOME TAXES       -       (4,680 )       5,802       (71,171 )
INCOME TAX BENEFIT       (1,564 )     (1,561 )       (909 )     (25,409 )
Net earnings (loss)     $ 1,564     $ (3,119 )     $ 6,711     $ (45,762 )
                     
BASIC EARNINGS (LOSS) PER SHARE     $ 0.02     $ (0.04 )     $ 0.09     $ (0.61 )
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING       78,633,535       74,505,534         78,361,299       75,487,262  
                     
DILUTED EARNINGS (LOSS) PER SHARE     $ 0.02     $ (0.04 )     $ 0.09     $ (0.61 )
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING       78,633,535       74,505,534         78,361,299       75,487,262  
     

RAM Energy Resources, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

     
    Nine months ended September 30,
    2010   2009
OPERATING ACTIVITIES:        
Net income (loss)   $ 6,711     $ (45,762 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities-        
Depreciation and amortization     20,387       24,377  
Amortization of deferred loan costs and Senior Notes discount     1,566       1,120  
Non-cash interest     2,336       829  
Accretion expense     1,288       1,449  
Impairment     -       47,613  
Unrealized (gain) loss on derivatives and premium amortization     (3,859 )     27,242  
Deferred income tax benefit     (933 )     (25,690 )
Share-based compensation     2,284       1,632  
(Gain) loss on disposal of other property, equipment and subsidiary     (38 )     89  
Other expense (income)     (574 )     448  
Changes in operating assets and liabilities-        
Accounts receivable     3,023       166  
Prepaid expenses, inventory and other assets     1,598       1,137  
Derivative premiums     (3,738 )     (1,781 )
Accounts payable and proceeds due others     1,603       (13,915 )
Accrued liabilities and other     (1,717 )     (15,468 )
Restricted cash     -       16,000  
Income taxes payable     (473 )     (176 )
Asset retirement obligations     (161 )     (287 )
Total adjustments     22,592       64,785  
Net cash provided by operating activities     29,303       19,023  
INVESTING ACTIVITIES:        
Payments for oil and natural gas properties and equipment     (27,476 )     (21,728 )
Proceeds from sales of oil and natural gas properties     478       6,156  
Payments for other property and equipment     (721 )     (504 )
Proceeds from sales of other property and equipment     4       433  
Net cash used in investing activities     (27,715 )     (15,643 )
FINANCING ACTIVITIES:        
Payments on long-term debt     (37,618 )     (24,120 )
Proceeds from borrowings on long-term debt     36,261       23,022  
Payments for deferred loan costs     -       (2,324 )
Stock repurchased     (331 )     (6 )
Net cash used in financing activities     (1,688 )     (3,428 )
DECREASE IN CASH AND CASH EQUIVALENTS     (100 )     (48 )
CASH AND CASH EQUIVALENTS, beginning of period     129       164  
CASH AND CASH EQUIVALENTS, end of period   $ 29     $ 116  
SUPPLEMENTAL CASH FLOW INFORMATION:        
Cash paid for income taxes   $ 616     $ 457  
Cash paid for interest   $ 13,518     $ 9,011  
DISCLOSURE OF NON CASH INVESTING AND FINANCING ACTIVITIES:        
Asset retirement obligations   $ 147     $ 115  
Payment-in-kind interest   $ 2,336     $ 829  
Receipt of common stock for settlement of contingent receivable   $ -     $ 2,134  
                                         

RAM Energy Resources, Inc.
Production by Area

                                         
                        Mature       Mature        
    Developing Fields       Oil Fields*       Natural Gas Fields        
    South Texas     Barnett Shale     Appalachia       Various       Various       Total
Three Months Ended September 30, 2010                                        
Aggregate Net Production                                        
Oil (MBbls)   11     1     -       205       30       247
NGLs (MBbls)   34     21     -       15       21       91
Natural Gas (MMcf)   511     127     12       61       504       1,215
MBoe   130     43     2       231       135       541
                                         
Three Months Ended September 30, 2009                                        
Aggregate Net Production                                        
Oil (MBbls)   12     2     -       233       31       278
NGLs (MBbls)   31     32     -       20       21       104
Natural Gas (MMcf)   525     195     21       135       612       1,488
MBoe   130     67     4       275       154       630
                                         
Change in MBoe   -     (24)     (2)       (44)       (19)       (89)
Percentage Change in MBoe   0.0%     -35.8%     -50.0%       -16.0%       -12.3%       -14.1%
                                           
                          Mature       Mature        
      Developing Fields       Oil Fields*       Natural Gas Fields        
      South Texas     Barnett Shale     Appalachia       Various       Various       Total
Nine Months Ended September 30, 2010                                          
Aggregate Net Production                                          
Oil (MBbls)     33     4     -       637       83       757
NGLs (MBbls)     94     80     -       44       62       280
Natural Gas (MMcf)     1,495     463     40       177      

1,539

      3,714
MBoe     376     161     6       711       402       1,656
                                           
Nine Months Ended September 30, 2009                                          
Aggregate Net Production                                          
Oil (MBbls)     45     6     1       726       80       858
NGLs (MBbls)     87     94     -       62       60       303
Natural Gas (MMcf)     1,547     604     66       530       1,911       4,658
MBoe     390     201     12       876       459       1,938
                                           
Change in MBoe     (14)     (40)     (6)       (165)       (57)       (282)
Percentage Change in MBoe     -3.6%     -19.9%     -50.0%       -18.8%       -12.4%       -14.6%
                                           

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

           

RAM Energy Resources, Inc.
Production and Prices Summary

 
           
    Three months ended   Nine months ended  
    September 30, 2010   September 30, 2010  
           
Production volumes:          
Oil (MBbls)     247       757    
NGLs (MBbls)     91       280    
Natural gas (MMcf)     1,215       3,714    
Total (MBoe)     541       1,656    
           
Average sale prices received:          
Oil (per Bbl)   $ 74.05     $ 75.16    
NGLs (per Bbl)   $ 35.71     $ 37.36    
Natural gas (per Mcf)   $ 4.05     $ 4.35    
Total per Boe   $ 48.91     $ 50.44    
           
Cash effect of derivative contracts:          
Oil (per Bbl)     ($4.68 )     ($4.08 )  
NGLs (per Bbl)     -       -    
Natural gas (per Mcf)     ($0.05 )   $ 0.07    
Total per Boe     ($2.24 )     ($1.70 )  
           
Average prices computed after cash effect          
of settlement of derivative contracts:          
Oil (per Bbl)   $ 69.37     $ 71.08    
NGLs (per Bbl)   $ 35.71     $ 37.36    
Natural gas (per Mcf)   $ 4.00     $ 4.42    
Total per Boe   $ 46.67     $ 48.74    
           
Cash expenses (per Boe):          
Oil and natural gas production taxes   $ 2.81     $ 2.76    
Oil and natural gas production expenses   $ 15.84     $ 15.19    
General and administrative   $ 5.42     $ 6.46    
Interest   $ 8.15     $ 8.16    
Taxes   $ 0.09     $ 0.37    
Total per Boe   $ 32.31     $ 32.94    
           
Cash flow per Boe   $ 14.36     $ 15.80    
 

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

Non-GAAP Financial Measures

Modified EBITDA, a non-GAAP measure, is determined by adjusting net income (loss) for the following: interest expense, income taxes, depreciation, amortization, accretion, share-based compensation, impairment charges, unrealized gains or losses on derivatives and legal settlement changes. Free cash flow is also a non-GAAP measure representing Modified EBITDA after adjustments for the cash portion of interest and income taxes. Adjusted net income is a non-GAAP measure which excludes the income tax affected impact of unrealized derivative gains or losses, legal settlement proceeds and impairment charges on GAAP income. These non-GAAP measures are presented because management believes it is a useful adjunct to cash provided by operating activities under accounting principles generally accepted in the United States (GAAP). These non-GAAP measures are widely accepted as financial indicators of an oil and gas company's ability to generate cash used to internally fund exploration and development activities and fund debt service costs. These non-GAAP measures are not a measure of financial performance under GAAP and should not be considered as an alternative to cash provided (used) by operating, investing, or financing activities as an indicator of cash flows, or as a measure of liquidity.
                         
000s, except per share amounts                        
      Qtr Ended   Qtr Ended       9 Mos Ended   9 Mos Ended  
      9/30/2010   9/30/2009       9/30/2010   9/30/2009  
                         
Modified EBITDA:                        
Net income (loss)     $ 1,564     $ (3,119 )       $ 6,711     $ (45,762 )  
Adjustments:                        
Interest expense     $ 4,452     $ 4,253         $ 13,214     $ 10,821    
PIK interest     $ 793     $ 786         $ 2,336     $ 829    
Amortization of deferred loan costs     $ 522     $ 522         $ 1,566     $ 1,120    
Depreciation, amortization and accretion     $ 7,234     $ 8,422         $ 21,675     $ 25,826    
Share-based compensation     $ 813     $ 539         $ 2,284     $ 1,632    
Income tax provision (benefit)     $ (1,564 )   $ (1,561 )       $ (909 )   $ (25,409 )  
Legal settlement proceeds     $ (24 )   $ -         $ (574 )   $ 448    
Impairment charges     $ -     $ -         $ -     $ 47,613    
Unrealized (gain) loss on derivatives     $ (1,782 )   $ 1,283         $ (6,136 )   $ 26,085    
                         
Modified EBITDA     $ 12,008     $ 11,125         $ 40,167     $ 43,203    
                         
Less:                        
                         
Cash paid for interest     $ 4,411     $ 2,223         $ 13,518     $ 9,011    
Cash paid for income tax     $ 51     $ 187         $ 616     $ 457    
                         
Free cash flow     $ 7,546     $ 8,715         $ 26,033     $ 33,735    
                         
Weighted average shares outstanding - basic       78,634       74,506           78,361       75,487    
Weighted average shares outstanding - diluted       78,634       74,506           78,361       75,487    
                         
Free cash flow per share - basic     $ 0.10     $ 0.12         $ 0.33     $ 0.45    
Free cash flow per share - diluted     $ 0.10     $ 0.12         $ 0.33     $ 0.45    
                         
Adjusted net income (loss): (1)                        
Net income (loss)     $ 1,564     $ (3,119 )       $ 6,711     $ (45,762 )  
Adjustments:                        
Tax affected impairment charges     $ -     $ -         $ -     $ 30,327    
                         
Tax affected legal settlement proceeds     $ (15 )   $ -         $ (356 )   $ 278    
                         
Tax affected unrealized (gain)loss on derivatives     $ (1,105 )   $ 795         $ (3,804 )   $ 16,173    
                         
Adjusted net income (loss)     $ 444     $ (2,324 )       $ 2,551     $ 1,016    
                         
Weighted average shares outstanding - basic       78,634       74,506           78,361       75,487    
Weighted average shares outstanding - diluted       78,634       74,506           78,361       75,487    
                         
Adjusted net income (loss) per share - basic     $ 0.01     $ (0.03 )       $ 0.03     $ 0.01    
Adjusted net income (loss) per share - diluted     $ 0.01     $ (0.03 )       $ 0.03     $ 0.01    
                         

(1) Comparability between years is partially compromised due to the differing tax rates associated with each period.

 

SOURCE: RAM Energy Resources, Inc.

RAM Energy Resources, Inc.
Robert E. Phaneuf, 918-632-0680
Vice President - Corporate Development 


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