RAME Ram Energy Resources, Inc. (MM)

RAM Energy Resources, Inc. (Nasdaq: RAME) today announced first quarter 2010 earnings results that included strong EBITDA driven by higher hydrocarbon prices and an improvement in key costs compared to the year-ago quarter.

RAM Reports 1Q2010 Net Income of $2.4 Million

For the quarter ended March 31, 2010, RAM reported net income of $2.4 million, or $0.03 per share, based upon 78.0 million diluted weighted average shares outstanding compared to a net loss of $29.4 million, or $0.38 per share, on 77.3 million shares outstanding in the first quarter of 2009. The 2009 quarter results included the recognition of a non-cash impairment of the carrying value of oil and gas properties of $47.6 million ($30.3 million after tax).

Higher Prices and Reduction in Key Costs Drive EBITDA Increase of 34%

EBITDA for the first quarter 2010 was $15.7 million, 34% above the $11.8 million in the first quarter of 2009. The combination of higher hydrocarbon prices, lower lease operating expenses and lower general and administrative expenses during the first quarter more than offset production decreases. The production decrease in this year’s quarter is attributable to limited natural gas drilling activity in 2009 reflecting low natural gas prices and weather-related downtime in this year’s first quarter. Free cash flow was $11.3 million, or $0.14 per diluted share outstanding, for the first quarter 2010 compared to $8.2 million, or $0.11 per diluted share outstanding, for the same quarter in 2009.

Production

Sixty-three percent of RAM’s production mix and approximately 78% of oil and gas sales were derived from oil and natural gas liquids (NGL). The average price of oil in the first quarter of 2010 of $75.83 per barrel was 96% above that of the year-ago quarter. Similarly, the average price of NGLs increased 138% over the first quarter of last year. The average price of natural gas was $5.07 per Mcf in the first quarter of the current year compared to $3.86 per Mcf last year. The benefit derived from higher average prices for oil, NGLs and natural gas partially compensated for the previously disclosed impact to production from decreased natural gas drilling in 2009 and severe winter weather early in this year’s first quarter, lifting oil and gas sales to $29.8 million in the first quarter compared to sales of $19.1 million in the similar quarter last year. This year’s first quarter 2010 production of 566,000 BOE was 14% below that of production in the prior year’s quarter. Severe winter weather is estimated to have reduced first quarter 2010 production by approximately 45,000 – 50,000 BOE.

Costs and Expenses

Production expenses were $13.99 per BOE in the first quarter of 2010, or a total of $7.9 million, 9% lower on a BOE basis than the $15.39 per BOE, or a total of $10.1 million, in the previous year’s quarter. Production taxes, which are based on realized prices at the wellhead for most of the company’s production in this year’s first quarter, were a total of $1.6 million compared to $872,000 during the first quarter of 2009, principally as a result of higher hydrocarbon prices. On a per BOE basis, production taxes were $2.82 per BOE in this year’s first quarter, 112% above the $1.33 per BOE in last year’s first quarter. Production taxes as a percent of oil and natural gas sales were 5.3% in the current year’s quarter compared to 4.6% of sales in the year-ago quarter. General and administrative expenses for the first quarter of 2010 were reduced to $3.8 million from $4.3 million in last year’s first quarter resulting from the collection of certain past due receivables and lower health and welfare costs. Interest expense for the first quarter of 2010 increased by $2.0 million, or 56%, to $5.6 million compared to the prior year’s first quarter interest expense of $3.6 million. The increase in total interest expense recorded is due principally to a higher blended interest rate of approximately 8.1% in the current quarter compared to a blended interest rate of 4.9% in last year’s quarter. Total debt at March 31, 2010 was $247.0 million, down 5.3% from the $260.7 million level at the end of the 2009 first quarter. Over the past year, available cash flow in excess of capital expenditures and proceeds of asset sales applied to debt reduction along with a positive impact to EBITDA from the rebound in oil and NGL prices and reductions to expenses during the past several quarters has allowed the company’s leverage ratio, a measure of debt to last twelve months of EBITDA, to decline to 3.97 times from the previous quarter’s 4.22 times.

First Quarter 2010 Capital Spending

Oil and gas related capital expenditures totaled approximately $7.8 million in the first quarter, of which approximately $7.5 million was allocated to lower risk development and exploitation activities and $308,000 for the acquisition of proven properties. RAM participated in the drilling of 21 gross (16.1 net) wells during the quarter, of which 10 gross (10 net) were completed and capable of commercial production, while the remainder were in the process of drilling, testing or completing at the end of the period. RAM continues to expect to fund its 2010 total non-acquisition capital budget of $50.0 million with cash flow from internal sources and the sale of unspecified non-core assets.

First Quarter 2010 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 Tuesday, May 4, at 8:00 a.m. Central Daylight Time. Interested parties may access the webcast by visiting the RAM Energy Resources, Inc. website at www.ramenergy.com. The teleconference may be accessed by dialing 866.788.0542 (domestic) or 857.350.1680 (international) and providing the call identifier “36423069” to the operator. An audio replay will be available until May 11, 2010 by dialing 888.286.8010 (domestic) or 617.801.6888 (international) and using pass code “61878980”.

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 planned non-acquisition capital spending, NYMEX prices of oil, natural gas, NGLs and company realizations, the impact of oil and gas derivatives, drilling activities, estimates of the impact of weather on production and the company’s production mix 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.

About RAM Energy Resources

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.

RAM Energy Resources, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share amounts)

(unaudited)

  Three months ended March 31, 2010   2009 REVENUES AND OTHER OPERATING INCOME: Oil and natural gas sales Oil $ 19,488 $ 11,258 Natural gas 6,429 6,050 NGLs   3,931     1,748   Total oil and natural gas sales 29,848 19,056 Realized gains (losses) on derivatives (898 ) 7,878 Unrealized gains (losses) on derivatives 1,935 (1,007 ) Other   36     85   Total revenues and other operating income 30,921 26,012   OPERATING EXPENSES: Oil and natural gas production taxes 1,594 872 Oil and natural gas production expenses 7,920 10,085 Depreciation and amortization 6,714 8,282 Accretion expense 382 404 Impairment - 47,613 Share-based compensation 686 541 General and administrative, overhead and other expenses, net of operator's overhead fees   3,770     4,345   Total operating expenses   21,066     72,142   Operating income (loss) 9,855 (46,130 )   OTHER INCOME (EXPENSE): Interest expense (5,635 ) (3,608 ) Interest income 2 20 Other expense   (9 )   (433 ) EARNINGS (LOSS) BEFORE INCOME TAXES 4,213 (50,151 ) INCOME TAX PROVISION (BENEFIT)   1,795     (20,793 ) Net earnings (loss) $ 2,418   $ (29,358 )   BASIC EARNINGS (LOSS) PER SHARE $ 0.03   $ (0.38 ) BASIC WEIGHTED AVERAGE SHARES OUTSTANDING   77,997,063     77,290,832     DILUTED EARNINGS (LOSS) PER SHARE $ 0.03   $ (0.38 ) DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING   77,997,063     77,290,832  

RAM Energy Resources, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

  March 31, December 31, 2010 2009 (unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 101 $ 129 Accounts receivable: Oil and natural gas sales, net of allowance of $50 ($50 at December 31, 2009) 12,473 12,585 Joint interest operations, net of allowance of $606 ($641 at December 31, 2009) 525 1,303 Other, net of allowance of $48 ($48 at December 31, 2009) 243 193 Prepaid expenses 1,835 1,970 Deferred tax asset 3,612 3,531 Inventory 3,762 3,900 Other current assets   29     27   Total current assets 22,580 23,638 PROPERTIES AND EQUIPMENT, AT COST: Proved oil and natural gas properties and equipment, using full cost accounting 709,901 702,502 Other property and equipment   9,509     9,337   719,410 711,839 Less accumulated depreciation, amortization and impairment   (469,177 )   (462,541 ) Total properties and equipment 250,233 249,298 OTHER ASSETS: Deferred tax asset 29,938 31,573 Derivative assets 783 - Deferred loan costs, net of accumulated amortization of $3,446 ($2,924 at December 31, 2009) 4,175 4,697 Other   1,955     1,956   Total assets $ 309,664   $ 311,162   LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Accounts payable: Trade $ 12,546 $ 15,697 Oil and natural gas proceeds due others 9,841 10,113 Other 409 636 Accrued liabilities: Compensation 1,774 2,664 Interest 2,935 2,933 Income taxes 832 655 Other 10 10 Derivative liabilities 3,655 4,471 Asset retirement obligations 713 711 Long-term debt due within one year   149     126   Total current liabilities 32,864 38,016 DERIVATIVE LIABILITIES - 358 LONG-TERM DEBT 246,880 246,041 ASSET RETIREMENT OBLIGATIONS 26,778 26,363 OTHER LONG-TERM LIABILITIES 10 10 COMMITMENTS AND CONTINGENCIES 900 900   STOCKHOLDERS' EQUITY (DEFICIT):

 

Common stock, $0.0001 par value, 100,000,000 shares authorized, 82,086,674 and80,748,674, shares issued, 78,128,753 and 76,951,883 shares outstanding at March 31,2010 and December 31, 2009, respectively

8 8 Additional paid-in capital 223,643 222,979 Treasury stock - 3,957,921 shares (3,796,791 shares at December 31,2009) at cost (6,513 ) (6,189 ) Accumulated deficit   (214,906 )   (217,324 ) Stockholders' equity (deficit)   2,232     (526 ) Total liabilities and stockholders' equity (deficit) $ 309,664   $ 311,162  

RAM Energy Resources, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

  Three months ended March 31, 2010   2009 OPERATING ACTIVITIES: Net income (loss) $ 2,418 $ (29,358 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities- Depreciation and amortization 6,714 8,282 Amortization of deferred loan costs and Senior Notes discount 522 299 Non-cash interest 765 - Accretion expense 382 404 Impairment - 47,613 Unrealized (gain) loss on derivatives and premium amortization (967 ) 1,290 Deferred income tax provision (benefit) 1,554 (20,785 ) Share-based compensation 686 541 Gain on disposal of other property, equipment and subsidiary (23 ) (15 ) Changes in operating assets and liabilities Accounts receivable 840 1,756 Prepaid expenses, inventory and other assets 272 832 Derivative premiums (990 ) (579 ) Accounts payable and proceeds due others (3,650 ) (4,944 ) Accrued liabilities and other (888 ) (1,903 ) Income taxes payable 177 (156 ) Asset retirement obligations   -     (112 ) Total adjustments   5,394     32,523   Net cash provided by operating activities   7,812     3,165   INVESTING ACTIVITIES: Payments for oil and natural gas properties and equipment (7,821 ) (13,258 ) Proceeds from sales of oil and natural gas properties 458 210 Payments for other property and equipment (254 ) (127 ) Proceeds from sales of other property and equipment   4     23   Net cash used in investing activities   (7,613 )   (13,152 ) FINANCING ACTIVITIES: Payments on long-term debt (10,034 ) (5,042 ) Proceeds from borrowings on long-term debt 10,131 15,000 Stock repurchased   (324 )   (6 ) Net cash (used in) provided by financing activities   (227 )   9,952   DECREASE IN CASH AND CASH EQUIVALENTS (28 ) (35 ) CASH AND CASH EQUIVALENTS, beginning of period   129     164   CASH AND CASH EQUIVALENTS, end of period $ 101   $ 129   SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for income taxes $ 64   $ 149   Cash paid for interest $ 4,347   $ 3,450   DISCLOSURE OF NON CASH INVESTING AND FINANCING ACTIVITIES: Asset retirement obligations $ 35   $ 1,002   Payment-in-kind interest $ 765   $ -  

RAM Energy Resources, Inc.

Production by Area

        Mature Mature Developing Fields Oil Fields* Natural Gas Fields   Three Months Ended March 31, 2010 South Texas Barnett Shale Appalachia Various Various Total Aggregate Net Production Oil (MBbls) 13 2 - 218 24 257 NGLs (MBbls) 35 31 - 13 19 98 Natural Gas (MMcf) 541 172 14 56 486 1,269 MBoe 139 61 2 240 124 566   Three Months Ended March 31, 2009 Aggregate Net Production Oil (MBbls) 19 2 - 251 18 290 NGLs (MBbls) 29 35 - 20 20 104 Natural Gas (MMcf) 519 238 23 119 668 1,567 MBoe 134 77 4 291 149 655   Change in MBoe 5 (16) (2) (51) (25) (89) Percentage Change in MBoe 3.7% -20.8% -50.0% -17.5% -16.8% -13.6%  

*Includes Electra/Burkburnett, Allen/Fitts and Layton fields.

RAM Energy Resources, Inc.

Production and Prices Summary

  Three months ended March 31, 2010   2009   Production volumes: Oil (MBbls) 257 290 NGLs (MBbls) 98 104 Natural gas (MMcf) 1,269 1,567 Total (MBoe) 566 655   Average sale prices received: Oil (per Bbl) $75.83 $38.75 NGLs (per Bbl) $40.11 $16.86 Natural gas (per Mcf) $5.07 $3.86 Total per Boe $52.73 $29.08   Cash effect of derivative contracts: Oil (per Bbl) $(3.84) $14.98 NGLs (per Bbl) $0.00 $0.00 Natural gas (per Mcf) $0.07 $2.25 Total per Boe $(1.59) $12.03   Average prices computed after cash effect of settlement of derivative contracts: Oil (per Bbl) $71.99 $53.73 NGLs (per Bbl) $40.11 $16.86 Natural gas (per Mcf) $5.14 $6.11 Total per Boe $51.14 $41.11   Cash expenses (per Boe): Oil and natural gas production taxes $2.82 $1.33 Oil and natural gas production expenses $13.99 $15.39 General and administrative $6.66 $6.63 Interest $7.68 $5.02 Taxes $0.11 $0.23 Total per Boe $31.26 $28.60   Cash Flow per Boe $19.88 $12.51

RAM Energy Resources, Inc.

Modified EBITDA, Free Cash Flow and Adjusted Net Income

( non-GAAP measures)

(unaudited)

 

Non-GAAP Financial Measures

Modified EBITDA, a non-GAAP measure, is determined by adding the following to net income (loss): interest expense, income taxes, depreciation, amortization, accretion, share-based compensation, impairment charges, unrealized gains or losses on derivatives and MTM settlement charges. Free cash flow is also a non-GAAP measure representing Modified EBITDA after adjustments for the cash portion of interest and income taxes. Adjusted net income is a non-GAAP measure which excludes the income tax affected impact of unrealized derivative gains or losses, MTM settlement charges and impairment charges on GAAP income. These non-GAAP measures are 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). These non-GAAP measures are widely accepted as financial indicators of an oil and gas company’s ability to generate cash used to internally fund exploration and development activities and fund debt service costs. These non-GAAP measures are 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.

 

Free Cash Flow $000s, except per share amounts Restated Qtr Ended Qtr Ended 3/31/2010 3/31/2009   Modified EBITDA: Net income (loss) $ 2,418 $ (29,358 ) Plus: Interest expense $ 4,348 $ 3,309 Plus: PIK interest $ 765 $ - Plus: Amortization of deferred loan costs $ 522 $ 299 Plus: Depreciation, amortization and accretion $ 7,096 $ 8,686 Plus: Share-based compensation $ 686 $ 541 Plus: Income tax provision (benefit) $ 1,795 $ (20,793 ) Plus: MTM escrowed legal settlement proceeds $ - $ 448 Plus: Impairment charges $ - $ 47,613 Less: Unrealized (gain) loss on derivatives $ (1,935 ) $ 1,007     Modified EBITDA $ 15,695 $ 11,752   Less:   Cash paid for interest $ 4,347 $ 3,450 Cash paid for income tax $ 64 $ 149       Free cash flow $ 11,284   $ 8,153     Weighted average shares outstanding - basic 77,997 77,291 Weighted average shares outstanding - diluted 77,997 77,291   Free cash flow per share - basic $ 0.14 $ 0.11 Free cash flow per share - diluted $ 0.14 $ 0.11     Adjusted net income: (1) Net income (loss) $ 2,418 $ (29,358 )   Plus: Tax affected impairment charge $ - 30,327   Plus: Tax affected settlement charge $ - 278   Plus: Tax affected unrealized (gain) loss on derivatives   (1,200 )   624     Adjusted net income $ 1,218   $ 1,871     Weighted average shares outstanding - basic 77,997 77,291 Weighted average shares outstanding - diluted 77,997 77,291   Adjusted net income per share - basic $ 0.02 $ 0.02 Adjusted net income per share - diluted $ 0.02 $ 0.02   (1) Comparability between years is partially compromised due to the differing tax rates associated with each period.