Although the closing of the Ascent acquisition did not occur until November 29, 2007, RAM moved quickly to initiate drilling on the company’s substantial existing inventory of proved undeveloped locations in South Texas. The Garza Hitchcock #12 was completed late last year with initial daily production of 1,947 Mcfe. In the first quarter 2008, the company drilled or was completing three additional wells on its acreage, the Garza Hitchcock #s 11, 13 and 14. The Garza Hitchcock # 13 was completed in the first quarter with initial daily production of 3,194 Mcfe. The Garza Hitchcock # 11 was completed early in the second quarter with an initial daily production rate of 2,698 Mcfe. Production from the Garza Hitchcock #s 11 and 13, along with that of the Garza Hitchcock # 14 which is currently completing, should contribute additional production in the second quarter. RAM has a 100 percent working interest and operates all of these South Texas wells. The company plans to drill six additional wells in South Texas during the year and has allocated a total of $19.0 million for this program in its 2008 capital budget.
The company has an interest in 15 producing wells in its Barnett Shale play in Jack and Wise Counties, Texas, and its seismic acquisition program continues to identify a growing inventory of potential drilling locations.
The pace of drilling activity and planned activity has significantly increased under our joint operating agreement with Devon Energy in the Rawle/Burress lease area. The Etta Burress 2-H and Etta Burress 4-H
wells, initiated in late 2007, have been drilled horizontally with the lateral portion of each well parallel to one another. These wells have successfully undergone our first simul-frac completion with resulting daily production of 1.46 MMcfe and 1.59 MMcfe of natural gas, respectively, initiated late in the first quarter. RAM has also participated with Devon Energy in the drilling of five additional wells on the same leases. Initial production of these wells, if successful, is likely to occur in the second quarter. The five wells are the Etta Burress 3-H, the Molloy 1-H, the T L Dickenson A 4-H, the T L Dickenson A 3-H and the T L Dickenson A 5-H, which is drilling. The Etta Burress 3-H horizontal well was successfully completed and has recorded an initial daily flow rate of 3.34 MMcf of natural gas and 58 barrels of oil. The Molloy A1-H, spud in early March 2008 to a target vertical depth of 7,100 feet with a lateral of approximately 1,900 feet, is currently completing. The T L Dickenson A 4-H well spud in April is awaiting completion as is the T L Dickenson A 3-H. Further, Devon has proposed an additional well to be drilled, in the relatively near future, on leases held under our joint operating agreement in the Barnett Shale.
Consistent with RAM’s objective to expeditiously test additional wells from its inventory of seismically identified Barnett Shale locations, the company spud the Brown 2-H well on April 8, 2008, and the well is currently drilling. The well targets a planned depth of approximately 7,100 feet with a lateral length of approximately 2,300 feet. RAM is operator and has approximately 89 percent working interest in the well and will bear a like percentage of the costs.
The Dethloff #1-H well, which also spud late last year under our joint operating agreement with EOG Resources, was completed in the first quarter. The well-bore was re-entered and drilled to its planned depth of approximately 7,000 feet with a lateral length of approximately 2,600 feet to test the Lower Barnett Shale formation. The well was completed with an initial daily production rate of 823 Mcf of natural gas and three barrels of oil.
Barnett Shale Project Inventory Remains High
Over the last two years, RAM has acquired and interpreted 45 square miles of 3-D seismic in Jack and Wise Counties, Texas. The 3-D seismic supported the drilling of the company’s 15 existing producing wells and continues to generate the growing number of identified locations in the company’s project inventory for potential near-to-intermediate term growth in its Barnett Shale play. RAM’s inventory remains substantial and
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includes two wells drilling, three wells completing or awaiting completion, and one well proposed for drilling. The company has 29 seismically identified locations including proved undeveloped locations, probable locations and possible locations excluding wells currently proposed to be drilled. In addition, RAM and its partners plan to acquire and interpret 20 square miles of additional 3-D seismic during 2008 to continue to add to its inventory of future locations. The company has budgeted $10.0 million for drilling on its Barnett Shale acreage during 2008; however, based on the acceleration in activity currently underway, the adequacy of the existing allocation may be reviewed.
West Virginia
The company has staked six drilling locations on its West Virginia Devonian shale play and plans to initiate drilling early in the second quarter of 2008. RAM has contracted for a rig to begin drilling the initial six wells of its planned 14 well drilling program budgeted for this year. Previous wells drilled on the company’s acreage have provided much of the science needed to allow moving to the early exploitation phase. The initial six wells to be drilled in 2008 are planned as horizontal wells with laterals ranging from 2,200 to 3,000 feet, aimed at supporting the commercialization of the company’s acreage. RAM has a 100 percent working interest and operates all of its wells in West Virginia. The company has budgeted $19.0 million for its 2008 Appalachia program.
Electra/Burkburnett
In the Electra/Burkburnett area of North Texas, responsible for approximately 25 percent of total net production in the first quarter 2008, the company continues its development drilling and recompletion activity. During the first quarter 2008 a total of 14 net wells were drilled with RAM’s own drilling rig, of which 13 were completed as producing wells, with the one remaining well completed after the end of the quarter, approximating a similar activity level as that of the first quarter 2007. Subsequent to the first quarter, the company drilled four additional wells, two of which have been completed and are producing. A capital budget of $7.5 million for drilling has been allocated to Electra/Burkburnett for 2008. The company owns a 100 percent working interest in and operates the Electra/Burkburnett area.
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Oklahoma
Most of the capital expenditure budget allocated to Oklahoma for 2008 is targeted in the company’s Allen and Fitts fields located in Pontotoc County where a total of 12 wells are planned this year to develop identified proved undeveloped locations and continue activity on existing waterflood projects underway. Through April 30, 2008, two wells have been drilled with resulting daily initial flow rates averaging 73 barrels of oil. A third well is completing and a fourth well has spud and is currently drilling. RAM plans a total of 10 wells to be drilled on these properties in 2008 and has budgeted $7.5 million for drilling activity during the year.
RAM to Webcast First Quarter 2008 Conference Call
The company’s teleconference call to review first quarter results will be broadcast live on a listen-only basis over the internet on Thursday, May 8, at 3:00 p.m. Central Daylight 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 800.299.7635 (domestic) or 617.786.2901 (international) and providing the call identifier “40950438” to the operator. The webcast and the accompanying slide presentation will be available for replay on the company’s website. An audio replay will be available until May 16, 2008 by dialing 888.286.8010 (domestic) or 617.801.6888 (international) and using pass code “61054247”.
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Forward-Looking Statements
This release includes certain statements that may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements in this release, other than statements of historical facts, that address estimates of capital spending, NYMEX prices of oil and gas and company realizations, the impact of oil and gas derivatives, drilling activities, estimates of general and administrative expenses 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.
RAM Energy Resources, Inc. is an independent energy company engaged in the acquisition, exploitation, exploration, and development of oil and gas properties and the marketing of crude oil and natural gas. Company headquarters are in Tulsa, Oklahoma, and its common shares are traded on the Nasdaq under the symbol RAME. For additional information, visit the company website at www.ramenergy.com.
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RAM Energy Resources, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
| March 31, | | December 31, |
| 2008 | | 2007 |
ASSETS | (unaudited) | | |
CURRENT ASSETS: | | | |
Cash and cash equivalents | $ 14,571 | | $ 6,873 |
Deposits to meet derivative margin requirements | 10,100 | | - |
Accounts receivable: | | | |
Oil and natural gas sales, net of allowance of $21 ($287 at December 31, 2007) | 17,796 | | 15,136 |
Joint interest operations, net of allowance of $487 ($428 at December 31, 2007) | 830 | | 687 |
Income taxes | 58 | | 58 |
Other, net of allowance of $26 ($26 at December 31, 2007) | 1,485 | | 2,180 |
Prepaid expenses | 2,169 | | 1,928 |
Deferred tax asset | 2,779 | | 3,786 |
Other current assets | 1,079 | | 842 |
Total current assets | 50,867 | | 31,490 |
PROPERTIES AND EQUIPMENT, AT COST: | | | |
Oil and natural gas properties and equipment, using full cost accounting | 593,283 | | 573,470 |
Unevaluated oil and natural gas properties | 20,009 | | 26,895 |
Other property and equipment | 9,032 | | 8,787 |
| 622,324 | | 609,152 |
Less accumulated depreciation and amortization | (78,197) | | (67,529) |
Total properties and equipment | 544,127 | | 541,623 |
OTHER ASSETS: | | | |
Deferred loan costs, net of accumulated amortization of $392 ($4,540 at December 31, 2007) | 4,847 | | 5,135 |
Other | 1,864 | | 1,994 |
Total assets | $ 601,705 | | $ 580,242 |
| | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
CURRENT LIABILITIES: | | | |
Accounts payable: | | | |
Trade | $ 14,010 | | $ 11,121 |
Oil and natural gas proceeds due others | 9,207 | | 7,800 |
Related party | 30 | | 31 |
Other | 1,188 | | 1,371 |
Accrued liabilities: | | | |
Compensation | 3,186 | | 3,807 |
Interest | 2,165 | | 3,794 |
Franchise taxes | 1,280 | | 1,286 |
Income taxes | 243 | | 203 |
Other | - | | 75 |
Derivative liabilities | 8,977 | | 5,302 |
Asset retirement obligations | 1,814 | | 1,904 |
Long-term debt due within one year | 1,160 | | 29,231 |
Total current liabilities | 43,260 | | 65,925 |
| | | |
OIL & NATURAL GAS PROCEEDS DUE OTHERS | 2,426 | | 2,383 |
DERIVATIVE LIABILITIES | 4,580 | | 3,073 |
LONG-TERM DEBT | 350,501 | | 306,516 |
DEFERRED INCOME TAXES | 69,234 | | 71,051 |
ASSET RETIREMENT OBLIGATION | 26,066 | | 25,741 |
UNCERTAIN TAX POSITIONS | 6,982 | | 6,855 |
COMMITMENTS AND CONTINGENCIES | | | |
| | | |
STOCKHOLDERS’ EQUITY: | | | |
Common stock, $0.0001 par value, 100,000,000 and 100,000,000 shares
authorized, 61,683,836 and 60,842,836, shares issued, 60,799,033 and
59,971,945 shares outstanding at March 31, 2008 and December 31, 2007, respectively | 6 | | 6 |
Additional paid-in capital | 132,172 | | 131,625 |
Treasury stock - 903,578 shares (889,666 shares at December 31,2007) at cost | (4,011) | | (3,945) |
Accumulated deficit | (29,511) | | (28,988) |
Stockholders’ equity | 98,656 | | 98,698 |
Total liabilities and stockholders’ equity | $ 601,705 | | $ 580,242 |
|
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RAM Energy Resources, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share amounts)
(unaudited)
| Three months ended | |
| March 31, | |
| 2008 | | 2007 | |
REVENUES AND OTHER OPERATING INCOME: | | | | |
Oil sales | $ 28,660 | | $ 10,222 | |
Natural gas sales | 10,878 | | 3,610 | |
Natural gas liquids sales | 3,995 | | 1,312 | |
Realized losses on derivatives | (2,318) | | (30) | |
Unrealized losses on derivatives | (5,259) | | (1,054) | |
Other | 94 | | 203 | |
Total revenues and other operating income | 36,050 | | 14,263 | |
| | | | |
OPERATING EXPENSES: | | | | |
Oil and natural gas production taxes | 2,429 | | 824 | |
Oil and natural gas production expenses | 9,322 | | 4,527 | |
Depreciation and amortization | 10,623 | | 3,425 | |
Accretion expense | 538 | | 146 | |
Share-based compensation | 547 | | 173 | |
General and administrative, overhead and other expenses, net of | | | | |
operator’s overhead fees | 5,517 | | 2,346 | |
Total operating expenses | 28,976 | | 11,441 | |
Operating income | 7,074 | | 2,822 | |
| | | | |
OTHER INCOME (EXPENSE): | | | | |
Interest expense | (8,162) | | (3,838) | |
Interest income | 73 | | 207 | |
Other expense | (149) | | - | |
LOSS BEFORE INCOME TAXES | (1,164) | | (809) | |
| | | | |
INCOME TAX BENEFIT | (641) | | (229) | |
| | | | |
Net loss | $ (523) | | $ (580) | |
| | | | |
| | | | |
BASIC LOSS PER SHARE | $ (0.01) | | $ (0.02) | |
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING | 59,161,096 | | 37,209,392 | |
| | | | |
DILUTED LOSS PER SHARE | $ (0.01) | | $ (0.02) | |
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING | 59,161,096 | | 37,209,392 | |
| | | | |
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RAM Energy Resources, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| Three months ended |
| March 31, |
| 2008 | | 2007 |
OPERATING ACTIVITIES: | | | |
Net loss | $ (523) | | $ (580) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities- | | | |
Depreciation and amortization | 10,623 | | 3,425 |
Amortization of deferred loan costs and Senior Notes discount | 307 | | 206 |
Accretion expense | 538 | | 146 |
Unrealized loss on derivatives | 5,259 | | 1,054 |
Deferred income taxes | (660) | | (340) |
Share-based compensation | 547 | | 173 |
Loss on disposal of other property and equipment | 7 | | - |
Undistributed losses on investment | 142 | | - |
Changes in operating assets and liabilities, net of effects of acquisitions | | | |
Deposits to meet derivative margin requirements | (10,100) | | - |
Accounts receivable | (2,149) | | 596 |
Prepaid expenses and other current assets | (477) | | 123 |
Accounts payable and oil and gas proceeds due others | 4,116 | | (4,377) |
Accrued liabilities | (2,403) | | (463) |
Income taxes payable | 19 | | - |
Asset retirement obligations | (194) | | - |
Total adjustments | 5,575 | | 543 |
Net cash provided by (used in) operating activities | 5,052 | | (37) |
| | | |
INVESTING ACTIVITIES: | | | |
Payments for oil and natural gas properties and equipment | (13,206) | | (4,468) |
Proceeds from sales of oil and natural gas properties | 241 | | 47 |
Payments for other property and equipment | (259) | | (39) |
Proceeds from sales of other property and equipment | 6 | | - |
Payments of merger costs | 35 | | - |
Net cash used in investing activities | (13,183) | | (4,460) |
| | | |
FINANCING ACTIVITIES: | | | |
Payments on long-term debt | (29,191) | | (338) |
Proceeds from borrowings on long-term debt | 45,102 | | 35 |
Payments for deferred loan costs | (16) | | - |
Common stock repurchased | (66) | | - |
Common stock offering, net of direct costs | - | | 27,366 |
Net cash provided by financing activities | 15,829 | | 27,063 |
| | | |
INCREASE IN CASH AND CASH EQUIVALENTS | 7,698 | | 22,566 |
CASH AND CASH EQUIVALENTS, beginning of period | 6,873 | | 6,721 |
CASH AND CASH EQUIVALENTS, end of period | $ 14,571 | | $ 29,287 |
| | | |
SUPPLEMENTAL CASH FLOW INFORMATION: | | | |
Cash paid for income taxes | $ - | | $ - |
Cash paid for interest | $ 9,466 | | $ 4,487 |
| | | |
DISCLOSURE OF NON CASH INVESTING AND FINANCING ACTIVITIES: | | | |
Establishment of asset retirement obligations | $ 129 | | $ - |
| | | |
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RAM Energy Resources, Inc.
Net Production, Unit Prices and Costs
| | | |
| Three months ended March 31, |
| 2008 | 2007 | Percent
Increase
Decrease |
Production volumes: | | | |
Oil (MBbls) | 298 | 181 | 64.6 |
Natural gas liquids (MBbls) | 74 | 35 | 111.4 |
Natural gas (MMcf) | 1,442 | 582 | 147.8 |
Total (MBoe) | 612 | 313 | 95.5 |
| | | |
Average realized prices (before effects of derivative contracts): | | | |
Oil (per Bbl) | $ 96.17 | $ 56.37 | 70.6 |
Natural gas liquids (per Bbl) | 53.99 | 37.94 | 42.3 |
Natural gas (per Mcf) | 7.54 | 6.21 | 21.4 |
Total per Boe | 71.13 | 48.41 | 46.9 |
| | | |
Effect of settlement of derivative contracts: | | | |
Oil (per Bbl) | $ (7.78) | $ 0.01 | |
Natural gas liquids (per Bbl) | - | - | |
Natural gas (per Mcf) | - | (0.05) | |
Total per Boe | (3.79) | (0.10) | |
| | | |
Average realized prices (after effects of derivative contracts): | | | |
Oil (per Bbl) | $ 88.39 | $ 56.38 | 56.8 |
Natural gas liquids (per Bbl) | 53.99 | 37.94 | 42.3 |
Natural gas (per Mcf) | 7.54 | 6.15 | 22.6 |
Total per Boe | 67.34 | 48.31 | 39.4 |
| | | |
Expenses (per Boe): | | | |
Oil and natural gas production taxes | $ 3.97 | $ 2.63 | 51.0 |
Oil and natural gas production expenses | 15.23 | 14.47 | 5.3 |
General and administrative | 9.01 | 7.50 | 20.1 |
Net cash interest expense | 12.72 | 12.27 | 3.7 |
| | | |
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RAM Energy Resources, Inc.
Reconciliation of Cash Flow from Operations
(a non-GAAP measure) to GAAP net
Cash Provided by Operating Activities
Non-GAAP Financial Measure
Cash flow, a non-GAAP measure, represents cash provided by operating activities before the impact of discontinued operations, changes in working capital items related to operating activities, and further adjusted for realized gains or losses on derivative transactions. This non-GAAP measure is 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). This non-GAAP cash flow measure is widely accepted as a financial indicator of an oil and gas company’s ability to generate cash which is used to internally fund exploration and development activities and fund debt service costs. This non-GAAP measure is 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.
| |
| | Three months ended | | Three months ended |
| | March 31, 2008 | | March 31, 2007 |
| | (in thousands) | | (in thousands) |
| | | | |
Net cash provided by (used in) operating activities per condensed consolidated statements of cash flow | | $5,052 | | $(37) |
Less: working capital changes | | (11,188) | | (4,121) |
| | | | |
Cash flow from operations (a non-GAAP measure) | | $16,240 | | $4,084 |
| | | | |
Cash flow from operations (a non-GAAP measure) | | $16,240 | | $4,084 |
Less: realized gains (losses) on derivatives | | (2,318) | | (30) |
| | | | |
Cash flow from operations (a non-GAAP measure) excluding realized gains (losses) on derivatives | | $18,558 | | $4,114 |
| | | | |
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RAM Energy Resources Inc. |
EBITDA (1) |
(A Non- GAAP Measure) |
| | | | |
| | First Quarter Ended March 31 |
| | 2008 | | 2007 |
| | (in thousands) | | (in thousands) |
| | | | |
| | | | |
| | | | |
| | | | |
Reported Net Income | $ | (523) | $ | (580) |
| | | | |
Plus: Interest Expense | | 8,162 | | 3,838 |
| | | | |
Depreciation and Amortization | | 10,623 | | 3,425 |
| | | | |
Accretion Expense | | 538 | | 146 |
| | | | |
Share-based Compensation | | 547 | | 173 |
| | | | |
Unrealized Derivative Losses | | 5,259 | | 1,054 |
| | | | |
Income tax (benefit) | | (641) | | (229) |
| | | | |
EBITDA | $ | 23,965 | $ | 7,827 |
| | | | |
| | | | |
1. The company discloses this non-GAAP financial measures as a useful adjunct to its | |
GAAP disclosures because: | | | | |
a. Management uses EBITDA to evaluate the company's operational trends and | |
performance relative to other industry peer companies | | | |
b. EBITDA is a frequently used comparative measure by securities analysts | | |
