Arena Resources Announces Third Quarter and Nine Month
2009 Financial and operating Results
Tulsa, Oklahoma — November 5, 2009 — Arena Resources, Inc. (NYSE-ARD)(“Arena”)(“Company”) announced today financial results for the three months and nine months ended September 30, 2009.
Three Months Ended September 30, 2009
For the three month period ended September 30, 2009, Arena had oil and gas revenues of $36,060,878 compared to $68,412,686 for the quarter ended September 30, 2008, a 47% decrease. Net income was $12,113,026 or $0.31 per fully diluted share, compared to net income of $26,922,966 or $0.69 per fully diluted share, for the same period in 2008, a 55% decrease.
The revenue decrease for the three month period ended September 30, 2009 was due to significant decreases in commodity prices and a slight decrease in oil production volumes partially offset by higher natural gas volumes. Arena’s total sales production for the quarter ended September 30, 2009 was 612,609 BOEs (Barrel of Oil Equivalents). This represents a 1% decrease over the same three month period in 2008 and a 12% increase over the second quarter of 2009. For the three months ended September 30, 2009, oil sales volume decreased to 511,104 barrels, compared to 528,044 barrels for the same period in 2008, a 3% decrease, and gas sales volume increased to 609,030 MCF (thousand cubic feet), compared to 544,746 MCF for the same period in 2008, a 12% increase. The average commodity prices received by Arena were $64.16 per barrel of oil, a 44% decrease, and $5.37 per MCF of natural gas, a 61% decrease, for the quarter ended September 30, 2009, compared to $115.41 per barrel of oil and $13.71 per MCF of natural gas for the quarter ended September 30, 2008.
Lease operating expenses for the three months ended September 30, 2009 were $5.12 per BOE, a 45% decrease from $9.36 the prior year. Production taxes decreased 47% to $3.11 per BOE and depreciation, depletion and amortization costs decreased 7% to $14.68 per BOE. General and administrative costs, which included a $1,098,081 charge for stock based compensation, were $4.84 per BOE, a 12% decrease. Net interest income was $202,340 or $0.33 per BOE, a 62% decrease.
Nine Months Ended September 30, 2009
For the nine month period ended September 30, 2009, the Company reported oil and gas revenues of $83,890,733 compared to oil and gas revenues of $175,884,359 for the nine month period ended September 30, 2008, a 52% decrease. Net income for the nine month period ended September 30, 2009 was $33,014,540 or $0.85 per fully diluted share, compared to net income of $70,035,710 or $1.87 per fully diluted share, for the same period in 2008, a 53% decrease.
For the nine months ended September 30, 2009, Arena’s total sales production was 1,728,368 BOEs, a 2% increase over 2008. Oil sales volume increased slightly to 1,461,844 barrels compared to 1,458,530 barrels for the same period in 2008. Gas sales volume increased to 1,599,142 MCF compared to 1,414,987 MCF for the same period in 2008, a 13% increase.
The average prices received for the nine months ended September 30, 2009 were $52.21 per barrel of oil, a 52% decrease, and $4.73 per MCF of natural gas, a 59% decrease, compared to $109.42 per barrel of oil and $11.51 per MCF of natural gas for the nine month period ended September 30, 2008.
For the nine months ended September 30, 2009, lease operating expenses were $6.14 per BOE, a 20% decrease from the prior year. Production taxes were $2.58 per BOE, a 52% decrease. Depreciation, depletion and amortization costs were $13.67 per BOE, a 1% decrease, and general and administrative costs, which included a $3,648,020 charge for stock based compensation, were $5.27 per BOE, a 6% decrease. Net interest income was $0.39 per BOE, a 316% increase.
Net cash flow from operations for the three and nine months ended September 30, 2009 was $29,351,488 or $0.75 per fully diluted share, and $79,910,629 or $2.05 per fully diluted share. This compares to net cash flow of $54,502,204 or $1.40 per fully diluted share and $140,042,188 or $3.73 per fully diluted share for the same periods in 2008 (1).
3rd Quarter Operations:
During the third quarter of 2009, the Company drilled 49 new San Andres zone development wells at its Fuhrman-Mascho property in Andrews County, Texas. Forty of the wells were completed and producing as of September 30, 2009, while the remaining nine were in various stages of completion. Additionally, twelve development wells which were drilled in the second quarter of 2009 were successfully completed and placed in production. As of September 30, 2009, the Company had drilled 579 new San Andres development wells on this lease since initiating its developmental drilling program in mid-April, 2005, and continued our 100% development drilling success rate. In late August, management contracted an additional drilling rig and had three rigs operating full-time at its Fuhrman-Mascho property. It is estimated that these rigs will drill approximately 166 new San Andres zone development wells in 2009.
Arena’s President and Chief Executive Officer, Mr. Phil Terry, stated, “After two sequential quarters of declining production due to operating only one drilling rig, we have now begun to see the results we anticipated from an increase in drilling activity. With two drilling rigs operating for the entire quarter and a third rig starting the end of August, we drilled 49 new development wells on our Fuhrman-Mascho properties in the third quarter. We have seen our average daily production increase from approximately 6,000 BOEs in the second quarter to over 6,600 in the third quarter. September was the single best production month in the Company’s history averaging over 7,400 BOEs per day. We have now added a fourth rig which began the first of November and anticipate that we will now drill approximately 175 new wells in 2009. We recently announced the commencement of construction on our oil gathering and pipeline systems to connect our Fuhrman-Mascho oil production into an existing oil pipeline prior to year-end. When completed, this will immediately save us approximately $1.00 per barrel in transportation charges and improve marketability. We continue to keep our operating costs down and have taken the necessary steps to assure the continuity of our accelerated development as we move through the remainder of 2009 and look forward to 2010.”
Derivative Update
In August 2009, the Company entered into agreements for two zero-cost collars for 2010, the first on 5,000 MMBtu of natural gas per day with a $4.00 floor and $7.87 ceiling for the period January 1, 2010 to December 31, 2010 based on the El Paso Permian Gas Index, and the second on 2,000 barrels of oil per day with a $65.00 floor and $93.00 ceiling for the period January 1, 2010 to December 31, 2010 based on the WTI Index price. Subsequent to September 30, 2009, the Company entered into an agreement for another zero-cost collar on 1,000 barrels of oil per day for the period of January 1, 2010 through December 31, 2010 at a floor of $70.00 and a ceiling of $92.85 based on the WTI Index price.
Capital Expenditures
In September the Board of Directors of Arena approved a $27 million increase in its capital expenditure budget (“CAPEX”) for 2009 to $107 million. Management placed a third drilling rig in operation in late August at Fuhrman-Mascho. The additional funds will be used to increase the number of new development wells to be drilled on this property in 2009 from approximately 125 to an estimated 166, refrac sixteen existing San Andres producing wells, commence the construction of the crude oil gathering system and connecting pipeline and continue the Yates gas development, focusing on the re-completion of existing, idle wellbores.
Credit Facility
As of September 30, 2009, the Company was in compliance with all covenants and did not have any amount outstanding under this credit facility.
Non-GAAP Financial Measures:
Earnings for the three months and nine months ended September 30, 2009 include non-cash charges for stock based compensation of $1,098,081 and $3,648,020 respectively. Excluding such items, the Company’s earnings would have been $0.33 per diluted share for the three months ended September 30, 2009, and $0.91 for the nine months ended September 30, 2009. The Company believes results excluding these items are more comparable to estimates provided by security analysts and, therefore, are useful in evaluating operational trends of the Company and its performance, compared to other similarly situated oil and gas producing companies.
1. Cash Flow from Operations is a non-GAAP financial measure that represents “Net Cash Provided By Operating Activities” adjusted for the change in operating assets and liabilities. See below for a reconciliation of the related amounts.
| |
ARENA RESOURCES, INC. STATEMENTS OF OPERATIONS |
| |
Three Months Ended
September 30 |
Nine Months Ended
September 30 |
2009
(Unaudited)
|
|
2009
(Unaudited)
|
2008
(Unaudited)
|
Oil and Gas Revenues
Costs and Operating Expenses
Oil & gas production costs
Oil & gas production taxes
Realized loss (gain) on oil derivatives
Depreciation, depletion & amortization
Accretion expense
General & administrative expense
Stock based compensation expense
Total Costs and Operating Expenses
Other Income (Expense)
Interest income
Interest expense
Net Other Expense
Income Before Provision for Income Taxes
Provision for Deferred Income Taxes
Net Income
Basic Net Income Per Common Share
Diluted Net Income Per Common Share
Other Comprehensive Income (Loss)
Realized loss (gain) on hedge derivative contract settlements
reclassified from other comprehensive loss (income). net of tax
Change in unrealized deferred hedging gains (losses), net of tax
Total Comprehensive Income
Basic Weighted-Average
Common Shares Outstanding
Diluted Weighted-Average
Common Shares Outstanding
|
$36,060,878
3,137,035
1,904,924
—
8,994,389
102,499
1,869,771
1,098,081
17,106,699
202,340
—
202,340
19,156,519
(7,043,493)
$ 12,113,026
$ 0.32
$ 0.31
—
44,281
$12,157,307
38,385,073
38,992,258
|
$68,412,686
5,7900,236
3,629,326
3,462,283
9,841,972
79,502
1,574,726
1,845,863
26,223,908
546,089
—
546,089
42,734,867
(15,811,901)
$ 26,922,966
$ 0.71
$ 0.69
4,940,665
2,863,848
$34,727,479
37,976,326
38,978,001
|
$83,890,733
10,614,882
4,455,164
(15,870,007)
23,634,894
294,189
5,458,711
3,648,020
32,235,853
678,646
—
678,646
52,333,526
(19,318,986)
$ 33,014,540
$ 0.86
$ 0.85
(10,222,546)
9,945
$22,801,939
38,281,141
38,901,519
|
$175,884,359
12,979,837
8,942,914
9,008,822
23,556,695
222,119
4,600,897
5,095,580
64,406,864
835,755
(1,145,456)
(309,701)
111,167,794
(41,132,084)
$ 70,035,710
$ 1.93
$ 1.87
6,950,305
(1,979,732)
$75,006,494
36,251,182
37,499,289
|
| |
COMPARATIVE OPERATING STATISTICS |
| |
Three Months Ended September 30, |
2009 |
2008 |
Change |
Net Production - BOE per day
Per BOE:
Average Sales Price
Lease Operating Expenses
Production Taxes
DD&A
General & Administrative Expenses
Stock Based Compensation
Interest Expense
|
|
6,659
58.86
5.12
3.11
13.68
3.16
2.11
(0.39)
|
6,726
110.55
9.36
5.86
15.81
2.71
3.01
0.18
|
-1%
-47%
-45%
-47%
-1%
17%
-30%
-316%
|
| |
Nine Months Ended September 30, |
2009 |
2008 |
Change |
Net Production - BOE per day
Per BOE:
Average Sales Price
Lease Operating Expenses
Production Taxes
DD&A
General & Administrative Expenses
Stock Based Compensation
Interest Expense
|
|
6,331
48.54
6.14
2.58
13.67
3.16
2.11
(0.39)
|
6,184
103.81
7.66
5.28
13.81
2.71
3.01
0.18
|
2%
-53%
-20%
-51%
-1%
17%
-30%
-316%
|
| |
CONSOLIDATED BALANCE SHEET |
| |
|
|
September 30
2009 |
December 31
2008 |
ASSETS
Current Assets
Cash
Accounts receivable
Joint interest billing receivable
Receivable from oil derivative
Fair value of oil derivative
Prepaid expenses
Total Current Assets
Property and Equipment, Using Full Cost Accounting
Oil and Gas properties subject to amortization
Inventory for property development
Drilling rigs
Land, buildings, equipment and leasehold improvements
Total Property and Equipment
Less: Accumulated depreciation and amortization
Net Property and Equipment
Total Assets |
|
|
$67,779,486
12,716,863
2,352,537
—
—
1,554,866
84,403,772
620,132,699
1,015,769
7,235,008
5,828,348
634,211,824
(84,971,991)
549,239,833
$ 633,643,605 |
$ 58,489,574
8,637,308
2,836,948
2,508,396
16,210,478
847,433
89,530,137
548,714,235
1,670,067
6,899,433
5,799,045
563,082,780
(60,928,142)
502,154,775
$ 591,684,775
|
| |
LIABILITIES AND STOCKHOLDERS' EQUITY |
Current Liabilities
Accounts payable
Deferred income taxes
Accrued liabilities
Total Current Liabilities
Long-Term Liabilities
Asset retirement liability
Deferred income taxes
Total Long-Term Liabilities
Stockholders' Equity
Preferred stock - $0.001 par value; 10,000,000 shares authorized
No shares issued or outstanding
Common stock - $0.001 par value; 100,000,000 shares authorized
38,423,789 shares and 38,210,187 shares outstanding respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total Stockholders' Equity
Total Liabilities and Stockholders' Equity |
|
|
$ 11,057,376
—
1,782,036
12,839,412
6,091,856
103,901,036
109,992,892
—
38,424
324,415,070
186,357,807
—
510,811,301
$ 633,643,605
|
$ 12,877,084
6,046,508
865,955
19,789,547
5,066,348
84,533,419
89,599,767
—
38,210
318,701,383
153,343,267
10,212,601
482,295,461
$ 591,684,775
|
| |
|
|
Nine Months Ended
September 30.
2009 |
Nine Months Ended
September 30,
2008 |
Cash Flows From Operating Activities
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion & amortization
Provision for income taxes
Stock based compensation
Accretion of asset retirement obligation
Changes in assets and liabilities:
Accounts and joint interest receivable
Income taxes payable
Prepaid expenses
Accounts payable & accrued liabilities
Net Cash Provided by Operating Activities
Cash Flows From Investing Activities
Purchase and development of oil and gas properties
Purchase of inventory for property development
Purchase of buildings, drilling rigs and equipment
Net Cash Used in Investing Activities
Cash Flows From Financing Activities
Proceeds from issuance of common stock, net of offering costs
Proceeds from exercise of warrants
Proceeds from exercise of options
Proceeds from issuance of notes payable
Payment of notes payable
Net Cash Provided by Financing Activities
Net Increase (Decrease) in Cash
Cash at Beginning of Period
Cash at End of Period
Supplemental Cash Flow Information
Cash paid for income taxes
Cash paid for interest
Non-Cash Investing and Financing Activities
Asset retirement obligation incurred in property development
Depreciation on drilling rigs capitalized as oil and gas properties
Use of inventory in property development |
|
|
$ 33,014,540
23,634,894
19,318,986
3.648,020
294,189
(1,086,748)
—
(707,453)
(903,627)
77,212,801
(65,362,425)
(4,261,467)
(364,878)
(69,988,770)
—
537,341
1,528,540
—
—
2,065,881
9,289,912
58,489,574
$ 67,779,486
—
—
731,319
408,955
4,915,765
|
$ 70,035,710
23,556,695
41,132,084
5,095,580
222,119
388,103
(612,480)
(732,837)
3,373,813
142,458,787
(151,469,679)
(1,392,728)
(1,350,237)
(154,212,644)
116,130,189
236,179
4,417,260
11,000,000
(46,000,000)
85,783,628
74,029,771
5,213,459
$ 79,243,230
$612,480
1,280,122
1,076,648
480,380
—
|
| |
RECONCILIATION OF CASH FLOW FROM OPERATIONS |
Net cash provided by
operating activities
Change in operating assets
and liabilities
Cash flow from activities
Management believes that the non-GAAP measure of cash flow from operations is useful information for investors because it is used internally and is accepted by the investment community as a means of measuring the Company's ability to fund its capital program. It is also used by professional research analysts in providing investment recommendations pertaining to companies in the oil and gas exploration and production industry. |
|
|
$ 77,212,801
2,697,828
$ 79,910,629
|
$ 142,458,787
(2,416,599)
$ 140,042,188
|
| |
NON-GAAP DISCLOSURE RECONCILIATION ADJUSTED EBITDA |
| |
|
|
Nine Months Ended
September 30,
2009 |
Nine Months Ended
September 30,
2008 |
NET INCOME
Interest expense (gain)
Income tax expense
Depreciation, depletion and amortization
Accretion of discounted liabilities
Stock based compensation
ADJUSTED EBITDA |
|
|
$ 33,901,514
(678,646)
19,318,986
23,634,894
294,189
3,648,020
$ 79,231,983
|
$ 70,035,710
309,701
41,132,084
23,556,695
122,119
5,059,580
$ 140,351,889
|
| |
About Arena Resources, Inc.
Arena Resources, Inc. is an oil and gas exploration, development and production company with current operations in Texas, Oklahoma, Kansas and New Mexico. |
|
This release contains forward-looking statements within the meaning of the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995 that involve a wide variety of risks and uncertainties, including, without limitations, statements with respect to the Company's strategy and prospects. Readers and investors are cautioned that the Company's actual results may differ materially from those described in the forward-looking statements due to a number of factors, including, but not limited to, the Company's ability to acquire productive oil and/or gas properties or to successfully drill and complete oil and/or gas wells on such properties, general economic conditions both domestically and abroad, and the conduct of business by the Company, and other factors that may be more fully described in additional documents set forth by the Company.
|
| |
For further information contact:
Bill Parsons • Vice President Investor Relations
480-947-1589 • bparsons@arenaresourcesinc.com |
|
| |
|
