RAM Energy (RAME) To Amend Financial Statments to Restate Impairment and Amortization Expense, and Depreciation
RAM Energy Resources, Inc. (NASDAQ: RAME) announced that it will be filing an amendment to the company's annual report on Form 10-K for the year ended December 31, 2008 and simultaneously will be filing amendments to its quarterly reports on Form 10-Q for the periods ended March 31, June 30 and September 30, 2009, primarily to restate impairment expense, depreciation and amortization expense, and related provision for income tax benefit, all as reflected in the financial statements for those periods as originally issued. The correction of these errors results in reducing the net loss reported by the company for 2008 by $8.1 million, with a corresponding positive change to stockholders' equity, and reducing the net loss reported for the first nine months of 2009 by $6.9 million, also with a corresponding positive change to stockholders' equity. All of the changes effected by the restatement are to non-cash items.
The estimate of RAM's proved oil and natural gas reserves for the period ended December 31, 2008 prepared by the company's independent petroleum engineers and utilized in connection with the preparation of the year-end financial statements, and the company's internal reserve report prepared in connection with the preparation of the March 31, 2009 unaudited financial statements, inadvertently included certain properties that were uneconomic at period-end commodity prices and development costs, thereby overstating reserve quantities and associated future development costs and resulting in the financial statement errors corrected by the restatement. Due to the errors in the reserve reports, future net revenues from the company's proved oil and natural gas properties discounted at 10%, or PV-10 Value, was understated by $10.7 million at December 31, 2008 and was also understated at March 31, 2009.
The errors in the company's reserve reports were limited to the reserve reports prepared for year-end 2008 and first quarter 2009 periods. The error of inclusion of uneconomic properties did not carry forward into reserve reports prepared for the period ended June 30, 2009. Procedures utilized by the company in finalizing and incorporating reserve data into the financial statements have been modified to prevent the reoccurrence of the error in future periods. While management believed that the effect of these non-cash errors was not material to the company's financial statements as issued and this position was concurred with by RAM's independent auditors, after an extended period of review and discussion with the SEC staff, management and the audit committee of the company's board of directors determined that it was in the best interests of the company and its stockholders to restate the financial statements and issue an amended annual report and amended quarterly reports reflecting the corrections.
The estimate of RAM's proved oil and natural gas reserves for the period ended December 31, 2008 prepared by the company's independent petroleum engineers and utilized in connection with the preparation of the year-end financial statements, and the company's internal reserve report prepared in connection with the preparation of the March 31, 2009 unaudited financial statements, inadvertently included certain properties that were uneconomic at period-end commodity prices and development costs, thereby overstating reserve quantities and associated future development costs and resulting in the financial statement errors corrected by the restatement. Due to the errors in the reserve reports, future net revenues from the company's proved oil and natural gas properties discounted at 10%, or PV-10 Value, was understated by $10.7 million at December 31, 2008 and was also understated at March 31, 2009.
The errors in the company's reserve reports were limited to the reserve reports prepared for year-end 2008 and first quarter 2009 periods. The error of inclusion of uneconomic properties did not carry forward into reserve reports prepared for the period ended June 30, 2009. Procedures utilized by the company in finalizing and incorporating reserve data into the financial statements have been modified to prevent the reoccurrence of the error in future periods. While management believed that the effect of these non-cash errors was not material to the company's financial statements as issued and this position was concurred with by RAM's independent auditors, after an extended period of review and discussion with the SEC staff, management and the audit committee of the company's board of directors determined that it was in the best interests of the company and its stockholders to restate the financial statements and issue an amended annual report and amended quarterly reports reflecting the corrections.
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