Arena Resources Announces Third Quarter and Nine Month 2009 Financial and Operating Results
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TULSA, Okla.--(BUSINESS WIRE)-- 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.
Cash Flow from Operations is a non-GAAP financial measure that represents
(1) "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 Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Oil and Gas $36,060,878 $68,412,686 $83,890,733 $175,884,359
Revenues
Costs and
Operating Expenses
Oil and gas 3,137,035 5,790,236 10,614,882 12,979,837
production costs
Oil and gas 1,904,924 3,629,326 4,455,164 8,942,914
production taxes
Realized loss
(gain) on oil - 3,462,283 (15,870,007 ) 9,008,822
derivatives
Depreciation,
depletion and 8,994,389 9,841,972 23,634,894 23,556,695
amortization
Accretion expense 102,499 79,502 294,189 222,119
General and
administrative 1,869,771 1,574,726 5,458,711 4,600,897
expense
Stock based
compensation 1,098,081 1,845,863 3,648,020 5,095,580
expense
Total Costs and 17,106,699 26,223,908 32,235,853 64,406,864
Operating Expenses
Other Income
(Expense)
Interest income 202,340 546,089 678,646 835,755
Interest expense - - - (1,145,456 )
Net Other Expense 202,340 546,089 678,646 (309,701 )
Income Before
Provision for 19,156,519 42,734,867 52,333,526 111,167,794
Income Taxes
Provision for
Deferred Income (7,043,493 ) (15,811,901 ) (19,318,986 ) (41,132,084 )
Taxes
Net Income $12,113,026 $26,922,966 $33,014,540 $70,035,710
Basic Net Income $0.32 $0.71 $0.86 $1.93
Per Common Share
Diluted Net Income $0.31 $0.69 $0.85 $1.87
Per Common Share
Other
Comprehensive
Income (Loss)
Realized loss
(gain) on hedge
derivative
contract
settlements - 4,940,665 (10,222,546 ) 6,950,305
reclassified from
other
comprehensive loss
(income), net of
tax
Change in
unrealized
deferred hedging 44,281 2,863,848 9,945 (1,979,732 )
gains (losses),
net of tax
Total
Comprehensive $12,157,307 $34,727,479 $22,801,939 $75,006,494
Income
Basic
Weighted-Average 38,385,073 37,976,326 38,281,141 36,251,182
Common Shares
Outstanding
Diluted
Weighted-Average 38,992,258 38,978,001 38,901,519 37,499,289
Common Shares
Outstanding
COMPARATIVE OPERATING STATISTICS
Three Months Ended September 30,
2009 2008 Change
Net Production - BOE per day 6,659 6,726 -1 %
Per BOE:
Average Sales Price 58.86 110.55 -47 %
Lease Operating Expenses 5.12 9.36 -45 %
Production Taxes 3.11 5.86 -47 %
DD&A 14.68 15.81 -7 %
General & Administrative Expenses 3.05 2.55 20 %
Stock Based Compensation 1.79 2.98 -40 %
Interest Expense (0.33 ) (0.88 ) -62 %
Nine Months Ended September 30,
2009 2008 Change
Net Production - BOE per day 6,331 6,184 2 %
Per BOE:
Average Sales Price 48.54 103.81 -53 %
Lease Operating Expenses 6.14 7.66 -20 %
Production Taxes 2.58 5.28 -51 %
DD&A 13.67 13.81 -1 %
General & Administrative Expenses 3.16 2.71 17 %
Stock Based Compensation 2.11 3.01 -30 %
Interest Expense (0.39 ) 0.18 316 %
ARENA RESOURCES, INC.
CONSOLIDATED BALANCE SHEET
September 30, December 31,
2009 2008
ASSETS
Current Assets
Cash $67,779,486 $58,489,574
Accounts receivable 12,716,863 8,637,308
Joint interest billing receivable 2,352,537 2,836,948
Receivable from oil derivative - 2,508,396
Fair value of oil derivative - 16,210,478
Prepaid expenses 1,554,886 847,433
Total Current Assets 84,403,772 89,530,137
Property and Equipment,Using Full cost
Accounting
Oil and gas properties subject to amortization 620,132,699 548,714,235
Inventory for property development 1,015,769 1,670,067
Drilling rigs 7,235,008 6,899,433
Land, buildings, equipment and leasehold 5,828,348 5,799,045
improvements
Total Property and Equipment 634,211,824 563,082,780
Less: Accumulated depreciation and amortization (84,971,991 ) (60,928,142 )
Net Property and Equipment 549,239,833 502,154,638
Total Assets $633,643,605 $591,684,775
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $11,057,376 $12,877,084
Deferred income taxes - 6,046,508
Accrued liabilities 1,782,036 865,955
Total Current Liabilities 12,839,412 19,789,547
Long-Term Liabilities
Asset retirement liability 6,091,856 5,066,348
Deferred income taxes 103,901,036 84,533,419
Total Long-Term Liabilities 109,992,892 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; 38,423,789 shares and 38,424 38,210
38,210,187 shares outstanding, respectively
Additional paid-in capital 324,415,070 318,701,383
Retained earnings 186,357,807 153,343,267
Accumulated other comprehensive loss - 10,212,601
Total Stockholders' Equity 510,811,301 482,295,461
Total Liabilities and Stockholders' Equity $633,643,605 $591,684,775
ARENA RESOURCES, INC.
STATEMENTS OF CASH FLOW
Nine Months Ended
September 30,
2009 2008
Cash Flows From Operating Activities
Net income $33,014,540 $70,035,710
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization 23,634,894 23,556,695
Provision for income taxes 19,318,986 41,132,084
Stock based compensation 3,648,020 5,095,580
Accretion of asset retirement obligation 294,189 222,119
Changes in assets and liabilities:
Accounts and joint interest receivable (1,086,748 ) 388,103
Income taxes payable - (612,480 )
Prepaid expenses (707,453 ) (732,837 )
Accounts payable and accrued liabilities (903,627 ) 3,373,813
Net Cash Provided by Operating Activities 77,212,801 142,458,787
Cash Flows from Investing Activities
Purchase and development of oil and gas (65,362,425 ) (151,469,679 )
properties
Purchase of inventory for property development (4,261,467 ) (1,392,728 )
Purchase of buildings, drilling rigs & equipment (364,878 ) (1,350,237 )
Net Cash Used in Investing Activities (69,988,770 ) (154,212,644 )
Cash Flows From Financing Activities
Proceeds from issuance of common stock, net of - 116,130,189
offering costs
Proceeds from exercise of warrants 537,341 236,179
Proceeds from exercise of options 1,528,540 4,417,260
Proceeds from issuance of notes payable - 11,000,000
Payment of notes payable - (46,000,000 )
Net Cash Provided by Financing Activities 2,065,881 85,783,628
Net Increase (Decrease) in Cash 9,289,912 74,029,771
Cash at Beginning of Period 58,489,574 5,213,459
Cash at End of Period $67,779,486 $79,243,230
Supplemental Cash Flow Information
Cash paid for income taxes - $612,480
Cash paid for interest - 1,280,122
Non-Cash Investing and Financing Activities
Asset retirement obligation incurred in property 731,319 1,076,648
development
Depreciation on drilling rigs capitalized as oil 408,955 480,380
and gas properties
Use of inventory in property development 4,915,765 -
RECONCILIATION OF CASH FLOW FROM OPERATIONS
Net cash provided by operating activities $77,212,801 $142,458,787
Change in operating assets and liabilities 2,697,828 (2,416,599 )
Cash flow from operations $79,910,629 $140,042,188
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
Nine Months Ended
September 30, September 30,
2009 2008
NET INCOME $33,014,540 $70,035,710
Interest expense (gain) (678,646 ) 309,701
Income tax expense 19,318,986 41,132,084
Depreciation, depletion and amortization 23,634,894 23,556,695
Accretion of discounted liabilities 294,189 222,119
Stock based compensation 3,648,020 5,095,580
ADJUSTED EBITDA $79,231,983 $140,351,889
Source: Arena Resources, Inc.
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