Cross Border Announces Fourth Quarter and Fiscal 2011 Financial Results
SAN ANTONIO, Texas, March 16, 2012 -- Cross Border Resources, Inc. (OTCQX: XBOR), ("Cross Border" or "the Company"), a San Antonio-based oil and gas exploration and production company,today announced its financial results for the fourth quarter and fiscal year ended December 31, 2011.Cross Border is an oil and gas exploration and production company resulting from the business combination of Doral Energy Corp. and Pure Energy Group, which was effective January 3, 2011. The merger impacts all comparisons to the prior year. Summary financial data is provided below:
Fourth Quarter 2011 Financial and Operating Highlights
| · | Revenues increased by 266.7% year-over-year to $1.7 million, up from $468,273 in the fourth quarter of 2010. |
| · | Production volume totaled24,743 barrels of oil equivalent (“boe”), an increase of 36.3% compared to 18,152 boe in the fourth quarter of 2010. |
| · | Average daily production sold during the fourth quarter of 2011 was 278 barrels of oil equivalent per day (“boed”) compared to 234 boed for the fourth quarter of 2010. The average production rate on December 31, 2011 was 421 boed. |
Fiscal 2011 Financial and Operating Highlights
| · | Revenues increased by 92.0% year-over-year to $7.3 million, up from $3.8 million for the year ended December 31, 2010. |
| · | Production volume totaled 98,855 boe, an increase of 27.6% compared to 77,501 boe in 2010. |
| · | Average daily production for the year ended December 31, 2011 was 271 boed compared to 212 boed in 2010. |
| · | Adjusted EBITDA totaled $2.7 million, or $0.18 per fully diluted share, an increase of 35.7% compared to adjusted EBITDA of $2.0 million in 2010. |
“We are pleased with the results of our first year of operations as Cross Border,” stated Everett “Will” Gray II, CEO and Chairman of Cross Border. “Revenues nearly doubled year-over-year, and production volume increased significantly. With our large, diverse footprint in the Permian Basin, we are well positioned for another year of improved financial and operational performance in 2012.”
Mr. Gray continued, “Going forward, we remain focused on ramping up our drilling activity with a primary focus on the highly productive 2nd Bone Spring play. We plan to participate in at least 25 gross wells in 2012 and expect to exit the year with an average daily production rate of 750 boed. Our partnerships with leading operators and our strong acreage portfolio provide an ideal platform to substantially grow reserves and production, leading to continued improvement in shareholder value.”
Results of Operations for the Year Ended December 31, 2011
Revenues
Revenues for the year endedDecember 31, 2011were $7.3 million as compared to $3.8 million for the year endedDecember 31, 2010. The increase of $3.5 million, or 92.0%, was primarily due toincreased production from wells added year-over-year, increased production due to the merger, and a year-over-year increase in the average sales prices for oil and natural gas. Oil and gas sales increased 77.4% year-over-year to $6.6 million as compared to $3.7 million for 2010. The Company also recorded a $599,100 gain on the sale of oil and gas properties during 2011.
Production volume totaled 98,855 boe, an increase of 27.6% compared to 77,501 boe for 2010. The increase was primarily due to a combination of increased production from wells added period-over-period and increased production brought on through the merger. Average daily production for 2011 was 271 boed, compared to 212 boed for 2010. Cross Border’s definition of daily production represents only what volumes were sold in each respective year and does not account for stored inventory.
Cross Border’s average realized crude oil sales price for 2011 was$86.70 per barrel, compared to $74.51 in 2010. The Company’s average realized natural gas sales price during 2011 was $6.03 per 1,000 cubic feet (“mcf”), compared to $5.72 per mcf for 2010.
Income from Operations
Operating loss for the year endedDecember 31, 2011 amounted to $926,506 as compared to operating income of $703,261 for the year endedDecember 31, 2010. Operating expenses for the year endedDecember 31, 2011 totaled $8.2 million, up 165.3% from $3.1 million in the previous fiscal year. The increase, which included approximately $300,000 of non-recurring expenses associated with the merger, was primarily due to expanded production, environmental remediation and delayed joint interest billings from an operating partner.
Net Income
Net loss for2011was $1.2 million as compared to net income of $282,989for2010. Net loss per diluted share was $0.08 for 2011.
Adjusted EBITDA
Adjusted EBITDA totaled $2.7 million, or $0.18 per fully diluted share, an increase of 35.7% compared to adjusted EBITDA of $2.0 million in 2010.
EBITDA is defined as net earnings before interest, income taxes, depreciation, depletion, amortization, abandonment and mark-to-market gains/losses on derivatives (adjusted EBITDA), which is a non-GAAP performance measure. Adjusted EBITDA does not represent, and should not be considered an alternative to GAAP measurements, and Cross Border’s calculations thereof may not be comparable to similarly titled measures reported by other companies. Cross Border’s management does not view adjusted EBITDA in isolation and also uses other measurements, such as net earnings (loss) and revenues to measure operating performance.A complete reconciliation of EBITDA to GAAP accounting standards can be found in this press release under the financial table “Reconciliation to GAAP.”
Liquidity and Capital Resources
As ofDecember 31, 2011, the Company’s current assets were $3.5 million and current liabilities were $2.4 million. Cash and cash equivalents totaled $472,967 as ofDecember 31, 2011. The Company’s shareholders’ equity atDecember 31, 2011was $17.6 million. The Company used $1.7 million for operating activities for the year ended December 31, 2011, compared to a provision of $2.4 million for 2010. The Company used $3.3 million for investing activities for the year endedDecember 31, 2011, compared to $1.6 million for 2010. The Company generated $4.5 million from financing activities for the year endedDecember 31, 2011, compared to $612,895 used in financing activitiesfor 2010.
2012 Business Outlook
Cross Border anticipates accelerated drilling activity during 2012 with a focus on its 2nd Bone Spring acreage located in both Eddy and Lea Counties, New Mexico. Approximately 64% of Cross Border's 2012 CAPEX is allocated to the 2nd Bone Spring development. Permitting activity continues at a fast pace within the Company’s footprint, which is primarily located within several very active trends. Secondly, the Company’s operating partners have achieved success in the Permian Basin, resulting from their deployment of advanced drilling and completion technologies coupled with favorable oil prices. Together, they have provided improving rates of return, helped mitigate the risk of dry or uneconomic wells, and efficiently added reserves. As a result, Cross Border has seen an increase in horizontal wells, which are expected to comprise nearly 50% of the 2012 drilling program. As an indication of scale, prior to developing reserves utilizing horizontal completions, just 50% of the 2012 drilling program would have been equivalent to approximately 48 vertical wells.
Cross Border expects to participate in approximately 25 gross (3.2 net) wells in 2012, with drilling capital expenditures of approximately $12.5 million for the year. Cross Border expects that 100% of this amount will be used to grow production through drilling wells and covering anticipated authorizations for expenditure by the Company's operating partners. Four wells are scheduled to spud during the current quarter, and to date, one well is producing, two wells are at total depth, and a fourth well is expected to spud in March.
Historically, Cross Border has been invoiced by its various operators over a three-month time frame with a net 30-day payment for each stage of the drilling and completion costs. If this remains the case, for the remainder of 2012, Cross Border would expect to fund approximately $10.5 million for its proportionate ownership costs with the remaining balance spilling over into Q1 of 2013. Cross Border expects to fund all remaining 2012 drilling commitments using cash-on-hand, cash flow and its existing credit facility, with the expectation of an approved increase in the current borrowing base predicated on a redetermination to include recent production adds.
Conference Call and Webcast
Management will host a conference call to discuss these financial results Friday, March 16, at 12:00 p.m. Eastern time (9:00 a.m. Pacific).
To participate in the call, please dial (877) 941-1427, or (480) 629-9664 for international calls, approximately 10 minutes prior to the scheduled start time. Interested parties can also listen via a live Internet webcast, which can be found via the Company’s website at http://www.xbres.com, or alternately at http://ViaVid.net.
A replay of the call will be available for two weeks from 3:00 p.m. EDT on March 16, 2012, until 11:59 p.m. EDT on March 30, 2012. The number for the replay is (877) 870-5176, or (858) 384-5517 for international calls; the passcode for the replay is4523374. In addition, a recording of the call will be available via the Company’s website at http://www.xbres.com for one year.
About Cross Border Resources
Information about the Company is available on its website, www.xbres.com, and news updates are available via Twitter, @CrossBorderRes.
Forward-Looking Statements
This news release contains forward-looking statements that are not historical facts and are subject to risks and uncertainties. Forward-looking statements are based on current facts and analyses and other information that are based on forecasts of future results, estimates of amounts not yet determined, and assumptions of management. Forward-looking statements are generally, but not always, identified by the words "expects", "plans", "anticipates", "believes", "intends", "estimates", "projects", "aims", "potential", "goal", "objective", "prospective", and similar expressions or that events or conditions "will", "would", "may", "can", "could" or "should" occur. Information concerning oil or natural gas reserve estimates may also be deemed to be forward-looking statements, as it constitutes a prediction of what might be found to be present when and if a project is actually developed.
Actual results may differ materially from those currently anticipated due to a number of factors beyond the reasonable control of the Company. It is important to note that actual outcomes and the Company's actual results could differ materially from those in such forward-looking statements. Factors that could cause actual results to differ materially include misinterpretation of data, inaccurate estimates of oil and natural gas reserves, the uncertainty of the requirements demanded by environmental agencies, the Company's ability to raise financing for operations, breach by parties with whom the Company has contracted, inability to maintain qualified employees or consultants because of compensation or other issues, competition for equipment, inability to obtain drilling permits, potential delays or obstacles in drilling operations and interpreting data, the likelihood that no commercial quantities of oil or gas are found or recoverable, and our ability to participate in the exploration of, and successful completion of development programs on all aforementioned prospects and leases. Additional information risks for the Company can be found in the Company's filings with the U.S. Securities and Exchange Commission.
Contacts:
Investor Relations Contact:
Jon Cunningham
RedChip Companies, Inc.
Tel:+1-800-733-2447, Ext. 107
jon@redchip.com
http://www.redchip.com
Company Contact:
Cross Border Resources, Inc.
Everett Willard "Will" Gray II
willg@xbres.com
Cross Border Resources, Inc.
Condensed Balance Sheets
December 31, 2011 and 2010
| | | 2011 | | | 2010
(Predecessor) | |
| | | | | | | (As Restated) | |
| ASSETS | | | | | | | | |
| | | | | | | | | |
| Current Assets: | | | | | | | | |
| Cash and cash equivalents | | $ | 472,967 | | | $ | 975,123 | |
| Accounts receivable - production | | | 1,184,544 | | | | 512,624 | |
| Accounts receivable - related party | | | - | | | | 250,000 | |
| Prepaid expenses | | | 1,808,944 | | | | - | |
| Current tax asset | | | 21,737 | | | | - | |
| Total Current Assets | | | 3,488,192 | | | | 1,737,747 | |
| | | | | | | | | |
| Property and Equipment: | | | | | | | | |
| Oil and gas properties (successful efforts method) | | | 30,540,978 | | | | 19,421,621 | |
| Less accumulated depletion and depreciation | | | (9,870,830 | ) | | | (7,328,326 | ) |
| Net Property and Equipment | | | 20,670,148 | | | | 12,093,295 | |
| | | | | | | | | |
| Other Assets: | | | | | | | | |
| Other property and equipment, net of accumulated depreciation of $126,473 and $94,759 in 2011 and 2010, respectively | | | 95,988 | | | | 124,776 | |
| Deferred bond costs, net of accumulated amortization of $344,300 and $293,915 in 2011 and 2010, respectively | | | 159,554 | | | | 209,939 | |
| Deferred bond discount, net of accumulated amortization of $127,483 and $108,827 in 2011 and 2010, respectively | | | 59,077 | | | | 77,733 | |
| Intangible assets, net of accumulated amortization of $197,616 and $-0- in 2011 and 2010, respectively | | | 1,778,541 | | | | - | |
| Goodwill | | | 1,395,807 | | | | - | |
| Other Assets | | | 119,070 | | | | 112,532 | |
| Total Other Assets | | | 3,608,037 | | | | 524,980 | |
| | | | | | | | | |
| Total Assets | | $ | 27,766,377 | | | $ | 14,356,022 | |
Cross Border Resources, Inc.
Condensed Balance Sheets
December 31, 2011 and 2010
| | | 2011 | | | 2010
(Predecessor) | |
| | | | | | (As Restated) | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | |
| | | | | | | | | |
| Current Liabilities: | | | | | | | | |
| Accounts payable - trade | | $ | 103,759 | | | $ | 875,881 | |
| Accounts payable - revenue distribution | | | 143,215 | | | | 49,880 | |
| Interest payable | | | 112,659 | | | | 107,875 | |
| Accrued expenses | | | 418,290 | | | | 28,460 | |
| Deferred revenues | | | 32,479 | | | | 162,394 | |
| Notes payable - current | | | 764,278 | | | | - | |
| Bonds payable - current portion | | | 570,000 | | | | 475,000 | |
| Creditors payable - current portion | | | 186,761 | | | | 150,000 | |
| Derivative liability - current portion | | | 56,908 | | | | - | |
| Total Current Liabilities | | | 2,388,349 | | | | 1,849,490 | |
| | | | | | | | | |
| Other Liabilities: | | | | | | | | |
| Asset retirement obligations | | | 1,186,260 | | | | 508,588 | |
| Deferred income tax liability | | | 21,737 | | | | - | |
| Line of credit | | | 2,381,000 | | | | 1,582,426 | |
| Derivative liability, net of current portion | | | 28,086 | | | | - | |
| Bonds payable, net of current portion | | | 2,825,000 | | | | 3,740,000 | |
| Creditors payable, net of current portion | | | 1,352,783 | | | | 1,656,305 | |
| Total Non-Current Liabilities | | | 7,794,866 | | | | 7,487,319 | |
| | | | | | | | | |
| TOTAL LIABILITIES | | | 10,183,215 | | | | 9,336,809 | |
| | | | | | | | | |
| STOCKHOLDERS’ EQUITY | | | | | | | | |
| Common stock, $0.001 par value, 36,363,637 shares authorized,16,151,946 shares issued and outstanding at December 31, 2011 | | | 16,152 | | | | - | |
| Additional paid-in capital | | | 32,617,690 | | | | - | |
| Retained earnings (accumulated deficit) (1) | | | (15,050,680 | ) | | | 5,019,213 | |
| TOTAL STOCKHOLDERS’ EQUITY | | | 17,583,162 | | | | 5,019,213 | |
| | | | | | | | | |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | | $ | 27,766,377 | | | $ | 14,356,022 | |
(1) Retained earnings as of December 31, 2010 (as restated) includes all equity accounts, including all Predecessor partner's capital accounts.
Cross Border Resources, Inc.
Condensed Statements of Operations
For the years ended December 31, 2011 and 2010
| | | 2011 | | | 2010
(Predecessor) | |
| REVENUES AND GAINS: | | | | | | (As Restated) | |
| Oil and gas sales | | $ | 6,584,134 | | | $ | 3,711,443 | |
| Gain on sale of oil and gas properties | | | 599,100 | | | | - | |
| Other | | | 129,915 | | | | 97,436 | |
| Total Revenues And Gains | | $ | 7,313,149 | | | $ | 3,808,879 | |
| | | | | | | | | |
| OPERATING EXPENSES: | | | | | | | | |
| Operating costs | | | 1,378,674 | | | | 450,774 | |
| Production taxes | | | 555,698 | | | | 379,370 | |
| Depreciation, depletion and amortization | | | 2,507,266 | | | | 1,199,365 | |
| Abandonment expense | | | 49,234 | | | | - | |
| Accretion expense | | | 84,428 | | | | 59,269 | |
| General and administrative | | | 3,664,355 | | | | 1,016,840 | |
| Total Operating Expenses | | | 8,239,655 | | | | 3,105,618 | |
| | | | | | | | | |
| GAIN (LOSS) FROM OPERATIONS | | | (926,506 | ) | | | 703,261 | |
| | | | | | | | | |
| OTHER INCOME (EXPENSE): | | | | | | | | |
| Bond issuance amortization | | | (50,385 | ) | | | (50,385 | ) |
| Gain (loss) on derivatives | | | (11,771 | ) | | | - | |
| Interest expense | | | (460,275 | ) | | | (413,338 | ) |
| Miscellaneous other income (expense) | | | 252,497 | | | | 43,451 | |
| Total Other Income (Expense) | | | (269,934 | ) | | | (420,272 | ) |
| | | | | | | | | |
| GAIN (LOSS) BEFORE INCOME TAXES | | | (1,196,440 | ) | | | 282,989 | |
| | | | | | | | | |
| Current tax benefit (expense) | | | 197,890 | | | | (5,886 | ) |
| Deferred tax benefit (expense) | | | (197,890 | ) | | | 5,886 | |
| Income tax benefit (expense) | | | - | | | | - | |
| | | | | | | | | |
| NET INCOME (LOSS) | | $ | (1,196,440 | ) | | $ | 282,989 | |
| | | | | | | | | |
| NET GAIN (LOSS) PER SHARE: | | | | | | | | |
| Basic and diluted | | $ | (0.08 | ) | | $ | — | |
| WEIGHTED AVERAGE SHARES OUTSTANDING: | | | | | | | | |
| Basic and diluted | | | 14,945,782 | | | | — | |
Cross Border Resources, Inc.
Condensed Statements of Cash Flows
For the years ended December 31, 2011 and 2010
| | | 2011 | | | 2010
(Predecessor) | |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | (As Restated) | |
| Net income (loss) | | $ | (1,196,440 | ) | | $ | 282,989 | |
| Adjustments to reconcile net income (loss) to cash used by operating activities: | | | | | | | | |
| Depreciation, depletion and amortization | | | 2,507,266 | | | | 1,199,365 | |
| Accretion | | | 84,428 | | | | 59,269 | |
| (Gain) loss on disposition of assets | | | (583,766 | ) | | | - | |
| Share-based compensation | | | 681,294 | | | | - | |
| Amortization of debt discount and deferred financing costs | | | 69,041 | | | | 69,042 | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Accounts receivable | | | (577,110 | ) | | | 27,595 | |
| Prepaid expenses and other current assets | | | (1,750,195 | ) | | | 18,046 | |
| Accounts payable | | | (1,122,000 | ) | | | 590,999 | |
| Accrued expenses | | | 207,720 | | | | 1,129 | |
| Deferred revenue | | | (129,915 | ) | | | 162,394 | |
| Derivative liability | | | 84,994 | | | | - | |
| NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | | | (1,724,683 | ) | | | 2,410,828 | |
| | | | | | | | | |
| CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | | | |
| Cash impact of merger, net | | | (62,797 | ) | | | - | |
| Capital expenditures - oil and gas properties | | | (3,980,470 | ) | | | (1,579,929 | ) |
| Proceeds from sale of interest in properties | | | 799,100 | | | | - | |
| Capital expenditures - other assets | | | (6,626 | ) | | | - | |
| NET CASH USED IN INVESTING ACTIVITIES | | | (3,250,793 | ) | | | (1,579,929 | ) |
| | | | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | |
| Proceeds from issuance of common stock, net of expenses | | | 5,090,728 | | | | - | |
| Net borrowings (payments) on line of credit | | | 798,574 | | | | - | |
| Proceeds from renewing notes | | | 139,359 | | | | - | |
| Repayments of notes payable | | | (382,081 | ) | | | - | |
| Repayments of bonds | | | (810,000 | ) | | | (490,000 | ) |
| Repayments to creditors | | | (266,760 | ) | | | (122,895 | ) |
| Payments to purchase stock options | | | (96,500 | ) | | | - | |
| NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | | | 4,473,320 | | | | (612,895 | ) |
| | | | | | | | | |
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | | | (502,156 | ) | | | 218,004 | |
| Cash and cash equivalents, beginning of year | | | 975,123 | | | | 757,119 | |
| Cash and cash equivalents, end of year | | $ | 472,967 | | | $ | 975,123 | |
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | | | | | | | | |
| Interest paid | | $ | 183,440 | | | $ | 408,307 | |
| Income taxes and dividends paid | | $ | - | | | $ | - | |
The above changes in current assets and current liabilities differ from changes between amounts reflected in the December 31, 2011 balance sheet due to current assets and current liabilities acquired in connection with the Company’s reverse acquisition with Pure Energy Group, Inc. and Pure Gas Partners II, LP, as more fully described in Note 1 to the unaudited financial statements.
Cross Border Resources, Inc.
Summary Operating Statistics
(Unaudited)
| | | Year Ended December 31, | |
| | | 2011 | | | 2010
(Predecessor Entity) | |
| | | | | | | |
| Revenues & Sales | | | | | | | | |
| Oil & Gas Sales | | $ | 6,584,134 | | | $ | 3,711,443 | |
| Gain on Sale of Oil & Gas Properties | | | 599,100 | | | | - | |
| Total revenue | | | 7,313,149 | | | | 3,808,879 | |
| Net Income (Loss) | | $ | (1,196,440 | ) | | $ | 282,989 | |
| | | | | | | | | |
| Net Income Per Share | | | | | | | | |
| Basic & Diluted | | $ | (0.08 | ) | | | n/a | |
| Average Number of Shares Outstanding | | | | | | | | |
| Basic & Diluted | | | 14,945,782 | | | | - | |
| | | | | | | | | |
| Production Volumes | | | | | | | | |
| Oil (Bbls) | | | 56,740 | | | | 36,963 | |
| Gas (mcf) | | | 252,690 | | | | 243,229 | |
| Total Barrels of Oil Equivalent (boe)* | | | 98,855 | | | | 77,501 | |
| | | | | | | | | |
| Average Barrels of Oil Equivalent per day (boepd) | | | 271 | | | | 212 | |
| | | | | | | | | |
| Oil (Bbls) | | | 57.4 | % | | | 47.7 | % |
| Gas (mcf) | | | 42.6 | % | | | 52.3 | % |
| Total Barrels of Oil Equivalent (boe)* | | | 100.0 | % | | | 100.0 | % |
| | | | | | | | | |
| Average sales price: | | | | | | | | |
| Gas ($ per mcf) | | $ | 6.03 | | | $ | 5.72 | |
| Oil ($ per bbl) | | $ | 86.70 | | | $ | 74.51 | |
| Average cost of production: | | | | | | | | |
| Average production cost ($/boe) | | $ | 12.69 | | | $ | 4.85 | |
| Average production taxes ($/boe) | | $ | 5.41 | | | $ | 4.88 | |
| | | | | | | | | |
| Depletion Expense | | $ | 2,240,542 | | | $ | 1,149,921 | |
| Depletion Expense ($/boe) | | $ | 22.66 | | | $ | 14.84 | |
| | | | | | | | | |
| Non-GAAP Adjusted EBITDA | | $ | 2,721,436 | | | $ | 2,005,346 | |
| Non GAAP Adjusted EBITDA Per Share | | | | | | | | |
| Basic & Diluted | | $ | 0.18 | | | | n/a | |
Cross Border Resources, Inc.
Reconciliation to GAAP
| | | Year Ended December 31, | |
| | | 2011 | | | 2010 | |
| | | | | | Predecessor Entity | |
| Net income (loss) | | $ | (1,196,440 | ) | | $ | 282,989 | |
| Interest expense and other | | | 460,275 | | | | 413,338 | |
| Income tax expense (benefit) | | | -- | | | | -- | |
| Accretion of asset retirement obligations | | | 84,428 | | | | 59,269 | |
| Depreciation, depletion, and amortization | | | 2,557,651 | | | | 1,249,750 | |
| Stock-based compensation | | | 681,294 | | | | -- | |
| Mark-to-market loss on commodity swaps | | | 84,994 | | | | -- | |
| Abandonment Expense | | | 49,234 | | | | -- | |
| Adjusted EBITDA | | $ | 2,721,436 | | | $ | 2,005,346 | |
# # #
Source: Cross Border Resources, Inc.
