(Source: Business Wire)
Arena Resources, Inc. (NYSE: ARD) ("Arena") ("Company") announced today financial results for the three months and six months ended June 30, 2009.
Three Months Ended June 30, 2009
For the three-month period ended June 30, 2009, Arena had oil and gas revenues of $27,636,695 compared to $62,159,281 for the quarter ended June 30, 2008, a 56% decrease. Net income was $14,436,066 or $0.37 per fully diluted share, compared to net income of $24,794,349 or $0.67 per fully diluted share, for the same period in 2008, a 42% decrease.
The revenue decrease for the three-month period ended June 30, 2009 was due to a decrease in oil production volumes and significant decreases in commodity prices. Arena's total sales production for the quarter ended June 30, 2009 was 547,706 BOEs (Barrel of Oil Equivalents). This represents a 2% decrease over the same three-month period in 2008 and a 4% decrease over the first quarter of 2009. For the three months ended June 30, 2009, oil sales volume decreased to 461,491 barrels, compared to 477,430 barrels for the same period in 2008, a 3% decrease, and gas sales volume increased to 517,289 MCF (thousand cubic feet), compared to 486,327 MCF for the same period in 2008, a 6% increase. The average commodity prices received by Arena were $55.23 per barrel of oil and $4.16 per MCF of natural gas for the quarter ended June 30, 2009, compared to $119.23 per barrel of oil and $10.77 per MCF of natural gas for the quarter ended June 30, 2008.
Lease operating expenses for the three months ended June 30, 2009 were $5.97 per barrel of oil equivalent ("BOE"), a 22% decrease from the prior year. Production taxes decreased 50% to $2.65 per BOE. Depreciation, depletion and amortization costs remained virtually unchanged at $13.53 per BOE. General and administrative costs, which included a $1,220,622 charge for stock-based compensation, were $6.33 per BOE, a 3% decrease. General and administrative costs in the quarter also included non-recurring costs of approximately $800,000 for severance pay and franchise taxes. Net interest income was $209,994 or $0.38 per BOE, a 176% increase.
Six Months Ended June 30, 2009
For the six-month period ended June 30, 2009, the Company reported oil and gas revenues of $47,829,855 compared to oil and gas revenues of $107,471,673 for the six-month period ended June 30, 2008, a 55% decrease. Net income for the six-month period ended June 30, 2009 was $20,901,514 or $0.54 per fully diluted share, compared to net income of $43,112,744 or $1.18 per fully diluted share, for the same period in 2008, a 52% decrease.
For the six months ended June 30, 2009, oil sales volume increased to 950,740 barrels compared to 930,486 barrels for the same period in 2008, a 2% increase. Gas sales volume increased to 990,112 MCF compared to 870,241 MCF for the same period in 2008, a 14% increase. The average prices received for the six months ended June 30, 2009 were $45.79 per barrel of oil and $4.34 per MCF of natural gas compared to $106.02 per barrel of oil and $10.14 per MCF of natural gas for the six-month period ended June 30, 2008.
For the six months ended June 30, 2009, lease operating expenses were unchanged at $6.70 per BOE. Production taxes were $2.29 per BOE, a 54% decrease. Depreciation, depletion and amortization costs were $13.12 per BOE, a 3% increase, and general and administrative costs, which included a $2,549,939 charge for stock-based compensation, were $5.51 per BOE, a 6% decrease. Net interest income was $0.43 per BOE, a 154% increase.
Net cash flow from operations for the three and six months ended June 30, 2009 was $31,639,033 or $0.81 per fully diluted share, and $50,559,141 or $1.30 per fully diluted share. This compares to net cash flow of $48,493,997 or $1.31 and $85,539,984 or $2.33 per fully diluted share for the same periods in 2008 (1).
2nd Quarter Operations:
During the second quarter of 2009, the Company drilled 33 new San Andres zone development wells at its Fuhrman-Mascho property in Andrews County, Texas. Twenty-one of the wells were completed and producing as of June 30, 2009, while the remaining twelve were in various stages of completion. Additionally, seven development wells which were drilled in the first quarter of 2009 were successfully completed and placed in production. As of June 30, 2009, the Company had drilled 530 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 mid-May, management activated its second Company owned drilling rig and now has two rigs operating full-time at its Fuhrman-Mascho property. It is estimated that these rigs will drill approximately 125 new San Andres zone development wells in 2009. The Yates gas pipeline construction was completed and tested in June and the Company has commenced initial production focusing on the re-completion of existing, idle well bores.
Arena's President and Chief Executive Officer, Mr. Phil Terry, stated, "We drilled 33 new development wells on our Fuhrman Mascho properties. We now have our two drilling rigs operating at the Fuhrman-Mascho and are currently drilling our 546th new well since April, 2005. Each rig is drilling a new well every four to five days. We are currently concentrating our drilling activities in two specific areas, the 'Grayburg Fairway' and South Fuhrman Mascho, which have consistently shown to produce better than average results. With higher oil prices we are now examining our list of refrac candidates in anticipation of reinstating our successful refrac program in the third and fourth quarters of 2009. We are moving ahead with plans to build gathering systems to connect our Fuhrman-Mascho oil production into an existing oil pipeline prior to year-end. The oil gathering and pipeline systems will immediately save us $1.00 per barrel in transportation charges alone. With the completion of the Yates pipeline, we have started producing and selling Yates gas. Due to current depressed gas prices, we are focusing on the recompletion of existing, idle well bores. We have experienced a dramatic drop in drilling and service-related costs since mid-2008 and continue to work closely with our vendors to further reduce costs and maintain those reductions. We continue to look at acquisition opportunities, concentrating on Permian Basin properties."
Derivative Update
Effective June 1, 2009, the Company monetized its only hedging component, a costless collar, on 1,000 barrels of oil per day with a $100.00 floor and $197.00 ceiling and a remaining period to December 31, 2009. This resulted in additional cash to the Company of approximately $8.0 million. In addition, the Company implemented a new hedge, a costless collar, on 3,000 barrels of oil per day with a $50.00 floor and $72.60 ceiling for the period June 1, 2009 to December 31, 2009.
Capital Expenditures
In May the Board of Directors of Arena approved a $20 million increase in its capital expenditure budget ("CAPEX") for 2009 to $85 million. The additional funds are directly related to increased activity at the Company's Fuhrman-Mascho property in Andrews County, Texas. Management placed its second company-owned drilling rig in operation in mid-May at Fuhrman-Mascho. During 2008, with commodity prices at their peak, the Company had as many as five rigs active at the 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 80 to an estimated 125.
Credit Facility
Effective as of June 30, 2009, Arena entered into a new agreement that provides for a credit facility of $150 million with a borrowing base of $75 million. The borrowing base can be expanded to a total of $150 million upon approval of the credit facility participants. The new facility has an interest rate grid with a range of LIBOR plus 2.25% to 3.25%, depending upon the Company's level of utilization of the credit facility with the total interest rate to be charged being no less than 4.00%. As of June 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 six months ended June 30, 2009 include non-cash charges for stock-based compensation of $1,220,622 and $2,549,939, respectively. Excluding such items, the Company's earnings would have been $0.39 per diluted share for the three months ended June 30, 2009, and $0.58 for the six months ended June 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. -------------------------------------------------------------------------------
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.
ARENA RESOURCES, INC. STATEMENTS OF OPERATIONS Three Months Ended Six Months Ended June 30, June 30, 2009 2008 2009 2008 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Oil and Gas Revenues $27,636,695 $62,159,281 $47,829,855 $107,471,673 Costs and Operating Expenses Oil and gas production costs 3,271,063 4,277,676 7,477,847 7,189,601 Oil and gas production taxes 1,451,901 2,983,838 2,550,240 5,313,588 Realized loss (gain) on oil derivatives (10,758,797 ) 3,958,099 (15,870,007 ) 5,546,539 Depreciation, depletion and amortization 7,409,024 7,574,790 14,640,505 13,714,723 Accretion expense 96,940 74,192 191,690 142,617 General and administrative expense 2,243,488 2,164,000 3,588,940 3,026,171 Stock-based compensation expense 1,220,622 1,488,905 2,549,939 3,249,717 Total Costs and Operating Expenses 4,934,241 22,521,500 15,129,154 38,182,956 Other Income (Expense) Interest income 209,994 248,705 476,306 289,666 Interest expense - (530,376 ) - (1,145,456 ) Net Other Expense 209,994 (281,671 ) 476,306 (855,790 ) Income Before Provision for Income Taxes 22,912,448 39,356,110 33,177,007 68,432,927 Provision for Deferred Income Taxes (8,476,382 ) (14,561,761 ) 12,275,493 (25,320,183 ) Net Income $14,436,066 $24,794,349 $20,901,514 $43,112,744 Basic Net Income Per Common Share $0.38 $0.69 $0.55 $1.22 Diluted Net Income Per Common Share $0.37 $0.67 $0.54 $1.18 Other Comprehensive Income (Loss) Realized loss (gain) on hedge derivative contract settlements reclassified from other comprehensive (loss) income (7,306,238 ) 1,154,450 (10,222,546 ) 2,009,640 Change in unrealized deferred hedging gains (losses) (44,281 ) (3,604,271 ) (34,336 ) (4,843,580 ) Total Comprehensive Income $7,085,547 $22,344,528 $10,644,632 $40,278,804 Basic Weighted-Average Common Shares Outstanding 38,246,241 35,865,694 38,228,314 35,379,132 Diluted Weighted-Average Common Shares Outstanding 38,930,370 36,974,979 38,860,345 36,686,173 -------------------------------------------------------------------------------
COMPARATIVE OPERATING STATISTICS Three Months Ended June 30, 2009 2008 Change Net Production - BOE per day 6,019 6,137 -2 % Per BOE: Average Sales Price 50.46 111.30 -55 % Lease Operating Expenses 5.97 7.66 -22 % Production Taxes 2.65 5.34 -50 % DD&A 13.53 13.56 0 % General & Administrative Expenses 4.10 3.87 6 % Stock Based Compensation 2.23 2.67 -16 % Interest Expense (0.38 ) 0.50 -176 % Six Months Ended June 30, 2009 2008 Change Net Production - BOE per day 6,164 5,909 4 % Per BOE: Average Sales price 42.87 99.92 -57 % Lease Operating Expenses 6.70 6.69 0 % Production Taxes 2.29 4.94 -54 % DD&A 13.12 12.75 3 % General & Administrative Expenses 3.22 2.82 14 % Stock Based Compensation 2.29 3.02 -24 % Interest Expense (0.43 ) 0.80 -154 % -------------------------------------------------------------------------------
ARENA RESOURCES, INC. CONSOLIDATED BALANCE SHEET June 30, December 31, 2009 2008 ASSETS Current Assets Cash $68,055,740 $58,489,574 Accounts receivable 9,936,259 8,637,308 Joint interest billing receivable 2,524,424 2,836,948 Receivable from oil derivative - 2,508,396 Fair value of oil derivative - 16,210,478 Prepaid expenses 743,274 847,433 Total Current Assets 81,259,697 89,530,137 Property and Equipment, Using Full cost Accounting Oil and gas properties subject to amortization 591,176,703 548,714,235 Inventory for property development 959,366 1,670,067 Drilling rigs 7,235,008 6,899,433 Land, buildings, equipment and leasehold improvements 5,828,348 5,799,045 Total Property and Equipment 605,199,425 563,082,780 Less: Accumulated depreciation and amortization (75,801,176) (60,928,142) Net Property and Equipment 529,398,249 502,154,638 Total Assets $610,657,946 $591,684,775 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $10,210,043 $12,877,084 Deferred income taxes - 6,046,508 Fair value of oil derivative 70,287 - Accrued liabilities 1,332,468 865,955 Total Current Liabilities 11,612,798 19,789,547 Long-Term Liabilities Asset retirement liability 5,601,912 5,066,348 Deferred income taxes 96,831,537 84,533,419 Total Long-Term Liabilities 102,433,449 89,599,767 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;38,352,551 shares and 38,210,187 shares outstanding, respectively 38,352 38,210 Additional paid-in capital 322,372,847 318,701,383 Retained earnings 174,244,781 153,343,267 Accumulated other comprehensive loss (44,281) 10,212,601 Total Stockholders' Equity 496,611,699 482,295,461 Total Liabilities and Stockholders' Equity $610,657,946 $591,684,775 -------------------------------------------------------------------------------
ARENA RESOURCES, INC. STATEMENTS OF CASH FLOW Six Months Ended June 30, 2009 2008 Cash Flows From Operating Activities Net income $20,901,514 $43,112,744 Adjustments to reconcile net income to net cashprovided by operating activities: Depreciation, depletion and amortization 14,640,505 13,714,723 Provision for income taxes 12,275,493 25,320,183 Stock based compensation 2,549,939 3,249,717 Accretion of asset retirement obligation 191,690 142,617 Changes in assets and liabilities: Accounts, joint interest and oil derivative receivable 1,521,969 (609,124 ) Other changes in deferred income taxes - (540,000 ) Prepaid expenses 104,159 (279,098 ) Accounts payable and accrued liabilities (2,200,528 ) 3,226,633 Net Cash Provided by Operating Activities 49,984,741 87,338,395 Cash Flows from Investing Activities Purchase and development of oil and gas properties (38,379,028 ) (89,000,997 ) Purchase of inventory for property development (2,796,336 ) (1,153,515 ) Purchase of buildings, drilling rigs & equipment (364,878 ) - Net Cash Used in Investing Activities (41,540,242 ) (90,154,512 ) Cash Flows From Financing Activities Proceeds from issuance of common stock, net of offering costs - 116,149,336 Proceeds from exercise of warrants 406,327 57,557 Proceeds from exercise of options 715,340 2,457,860 Proceeds from issuance of notes payable - 11,000,000 Payment of notes payable - (46,000,000 ) Net Cash Provided by Financing Activities 1,121,667 83,664,753 Net Increase (Decrease) in Cash 9,566,166 80,848,636 Cash at Beginning of Period 58,489,574 5,213,459 Cash at End of Period $68,055,740 $86,062,095 Supplemental Cash Flow Information Cash paid for income taxes - $540,000 Cash paid for interest - 1,280,122 Non-Cash Investing and Financing Activities Asset retirement obligation incurred in property development 343,874 676,797 Depreciation on drilling rigs capitalized as oil and gas properties 232,529 319,784 Use of inventory in property development 3,507,037 - RECONCILIATION OF CASH FLOW FROM OPERATIONS Net cash provided by operating activities $49,984,741 $87,338,395 Change in operating assets and liabilities 574,400 (1,798,411 ) Cash flow from operations $50,559,141 $85,539,984 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. -------------------------------------------------------------------------------
ARENA RESOURCES, INC. NON-GAAP DISCLOSURE RECONCILIATION ADJUSTED EBITDA Six Months Ended June 30, June 30, 2009 2008 NET INCOME $20,901,514 $43,112,744 Interest expense (476,306 ) 855,790 Income tax expense 12,275,493 25,320,183 Depreciation, depletion and amortization 14,640,505 13,714,723 Accretion of discounted liabilities 191,690 142,617 Stock based compensation 2,549,939 3,249,717 ADJUSTED EBITDA $50,082,835 $86,395,774 -------------------------------------------------------------------------------
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