RAME Ram Energy Resources, Inc. (MM)

RAM Energy Resources, Inc. (Nasdaq: RAME) today announced second quarter 2010 earnings and financial highlights.

RAM Reports 2Q 2010 Net Income of $2.7 Million

For the quarter ended June 30, 2010, RAM reported net income of $2.7 million, or $0.03 per share, based on 78.4 million diluted weighted average shares outstanding compared to a loss of $13.3 million, or $0.18 a share, on 74.7 million shares outstanding in the year-ago quarter. Adjusted net income for the second quarter was $889,000, or $0.01 per share. The calculation of adjusted net income excludes the after tax impact of unrealized, non-cash, mark-to-market (MTM) gains associated with oil and natural gas derivatives covering future periods and non-cash legal reserve valuation changes. Adjusted net income in the last year’s second quarter totaled $1.5 million, or $0.02 per share, after excluding the tax affected impact of unrealized MTM losses.

Modified EBITDA and Free Cash Flow

Modified EBITDA (a non-GAAP measure) was $12.5 million for the second quarter, compared with $20.3 million in last year’s quarter which was aided by realized derivative gains of $10.7 million. Similarly, free cash flow (a non-GAAP measure) was $7.2 million, or $0.09 per share, for this year’s second quarter compared to $16.9 million, or $0.23 per share, in last year’s second quarter.

Commodity Prices and Revenues

Second quarter production totaled 549 thousand barrel of oil equivalents (BOE), down 3% sequentially from first quarter 2010 production of 566 thousand BOE, principally the result of a shortage of fracturing and stimulation crews and equipment which delayed initiation of production from wells drilled in South Texas, combined with natural production declines and weather related disruptions. Second quarter 2010 production was down 16% compared to the 652 thousand BOE in the second quarter 2009.

The company’s realized price for oil increased 35% to an average of $75.57 per barrel in the second quarter of 2010 compared with last year’s second quarter average realized price of $55.98 per barrel. Similarly, the company’s realized price for natural gas rose 28% to an average of $3.92 per thousand cubic feet (Mcf) compared to an average of $3.06 per Mcf in the second quarter of 2009. In addition, the price of NGLs grew 44%, averaging $36.04 per barrel for this year’s second quarter. The positive impact from the 38% increase in total average price per BOE in the second quarter of 2010 more than offset the decline in production, allowing oil and gas revenue for the second quarter to grow to $27.2 million, compared to $23.5 million in the year ago second quarter.

Net derivative activity was relatively modest, resulting in a net $1.7 million gain in the second quarter 2010 and was comprised of realized losses from contract settlements and premium costs of $707,000 and unrealized MTM gains of $2.4 million. As a result, total revenues for the quarter rose to $29.0 million compared to total revenues of $10.4 million in last year’s second quarter. Net derivative activity in last year’s second quarter totaled a net $13.1 million loss, as the combination of $10.7 million of realized gains was more than offset by unrealized losses of $23.8 million. These net derivative losses effectively offset a substantial portion of the 2009 quarter’s oil and gas revenue of $23.5 million, reducing total revenues to $10.4 million.

Costs and Expenses

Production expenses were $8.7 million in the second quarter of 2010, 5% below the $9.1 million in the previous year’s quarter. Production taxes were $1.5 million in this year’s second quarter, up 57% compared to production taxes of $927,000 in the same quarter last year, primarily due to higher hydrocarbon prices during 2010 and due to retroactive severance tax refunds granted during the year-ago quarter. General and administrative expenses of $4.0 million were 7% higher than those expenses in last year’s second quarter of $3.7 million principally due to higher employee-related costs. The company continues to focus on the containment of administrative costs despite a higher level of oilfield activity and capital budget in the current year.

Long-Term Debt and Liquidity

As of June 30, 2010, RAM’s outstanding borrowings under its credit facility totaled $245.0 million, of which term debt was $112.5 million and $132.5 million was drawn on its revolver, which is currently subject to a $175.0 million borrowing base. Outstanding borrowings at June 30 last year totaled $255.4 million.

Interest expense for the second quarter 2010 was $5.7 million compared to $3.6 million in the year-ago quarter. Similarly, the blended interest rate on borrowings was 8.2% in the second quarter compared to the blended rate in last year’s quarter of 5.7%. The increase in interest expense and higher blended interest rate is due to the company entering into an amendment to its credit facility in June 2009 which increased the interest rate of its term and revolver debt in exchange for increased financial flexibility.

Six Month 2010 Results

Six month production totaled 1.1 million BOE, down 15% from production in the first half of 2009 of 1.3 million BOE, resulting primarily from weather-related interruptions in both the first and second quarters of 2010, natural production declines and a shortage of fracturing and stimulation crews and equipment which delayed bringing South Texas wells online. Net income for the six months ended June 30, 2010 was $5.1 million, or $0.07 per share compared to a loss of $42.6 million, or $0.56 per share in the year-ago period. Free cash flow (a non-GAAP measure) for the first half of 2010 was $18.5 million, or $0.24 per share, compared to $25.0 million, or $0.33 per share, for the same period last year.

Free cash flow funded capital expenditures of $18.7 million made during the first six months of the year. Similarly, modified EBITDA (a non-GAAP measure) was $28.2 million for the first half of 2010 compared to $32.1 million for the same period last year.

Modified EBITDA Revision to Range of $55 - $58 Million

Weather-related production interruptions combined with the delays in bringing South Texas production online in a timely manner as a result of a shortage of crews and equipment to provide fracture and stimulation services in the first half of the year has contributed to a revision in production expectations to a range of 2.2 – 2.3 million BOE for the year from prior expectations of a range of 2.5 – 2.6 million BOE. Because of these reduced expectations for volumes and the company’s outlook for hydrocarbon prices and cost of operations for the second half of the current year, RAM is also reducing its guidance for modified EBITDA to a range of $55 - $58 million for the 2010 year from the previously disclosed range of $65 - $68 million.

RAM to Webcast Second Quarter 2010 Conference Call

The company’s teleconference call to review second quarter results will be broadcast live on a listen-only basis over the internet on Tuesday, August 3 at 8:30 a.m. Eastern 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 866-543-6407 (domestic) or 617-213-8898 (international) and providing the call identifier “11568958” to the operator. The webcast will be available for replay on the company’s website following the call’s completion. An audio replay will be available until August 9, 2010 by dialing 888-286-8010 (domestic) or 617-801-6888 (international) and using pass code “65608926.”

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 targets for production, costs, EBITDA, free cash flow, realized prices of oil and gas, the impact of oil and gas derivatives, drilling activities, borrowing availability, 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

RAM Energy Resources, Inc. is an independent energy company engaged in the acquisition, exploitation, exploration, and development of oil and natural 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 June 30,   Six months ended June 30, 2010   2009 2010   2009 REVENUES AND OTHER OPERATING INCOME: Oil and natural gas sales Oil $ 19,120 $ 16,206 $ 38,608 $ 27,464 Natural gas 4,818 4,907 11,247 10,957 NGLs   3,280     2,387     7,211     4,135   Total oil and natural gas sales 27,218 23,500 57,066 42,556 Realized gains (losses) on derivatives (707 ) 10,671 (1,605 ) 18,549 Unrealized gains (losses) on derivatives 2,419 (23,795 ) 4,354 (24,802 ) Other   38     43     74     128   Total revenues and other operating income 28,968 10,419 59,889 36,431   OPERATING EXPENSES: Oil and natural gas production taxes 1,453 927 3,047 1,799 Oil and natural gas production expenses 8,662 9,119 16,582 19,204 Depreciation and amortization 6,891 8,186 13,605 16,468 Accretion expense 454 532 836 936 Impairment - - - 47,613 Share-based compensation 785 552 1,471 1,093

General and administrative, overhead and other expenses, net of operator's overhead fees

  3,992     3,745     7,762     8,090   Total operating expenses   22,237     23,061     43,303     95,203   Operating income (loss) 6,731 (12,642 ) 16,586 (58,772 )   OTHER INCOME (EXPENSE): Interest expense (5,714 ) (3,601 ) (11,349 ) (7,209 ) Interest income 2 9 4 29 Other income (expense)   570     (106 )   561     (539 ) EARNINGS (LOSS) BEFORE INCOME TAXES 1,589 (16,340 ) 5,802 (66,491 ) INCOME TAX PROVISION (BENEFIT)   (1,140 )   (3,055 )   655     (23,848 ) Net earnings (loss) $ 2,729   $ (13,285 ) $ 5,147   $ (42,643 )   BASIC EARNINGS (LOSS) PER SHARE $ 0.03   $ (0.18 ) $ 0.07   $ (0.56 ) BASIC WEIGHTED AVERAGE SHARES OUTSTANDING   78,446,305     74,696,028     78,222,925     75,986,262     DILUTED EARNINGS (LOSS) PER SHARE $ 0.03   $ (0.18 ) $ 0.07   $ (0.56 ) DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING   78,446,305     74,696,028     78,222,925     75,986,262    

RAM Energy Resources, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

    June 30,   December 31, 2010 2009 (unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 18 $ 129 Accounts receivable: Oil and natural gas sales, net of allowance of $50 ($50 at December 31, 2009) 10,189 12,585 Joint interest operations, net of allowance of $596 ($641 at December 31, 2009) 477 1,303 Other, net of allowance of $48 ($48 at December 31, 2009) 425 193 Derivative assets 124 - Prepaid expenses 1,502 1,970 Deferred tax asset 3,923 3,531 Inventory 3,733 3,900 Other current assets   4     27   Total current assets 20,395 23,638 PROPERTIES AND EQUIPMENT, AT COST: Proved oil and natural gas properties and equipment, using full cost accounting 720,561 702,502 Other property and equipment   9,587     9,337   730,148 711,839 Less accumulated depreciation, amortization and impairment   (476,033 )   (462,541 ) Total properties and equipment 254,115 249,298 OTHER ASSETS: Deferred tax asset 30,913 31,573 Derivative assets 910 - Deferred loan costs, net of accumulated amortization of $3,967 ($2,924 at December 31, 2009) 3,653 4,697 Other   1,958     1,956   Total assets $ 311,944   $ 311,162   LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Accounts payable: Trade $ 17,804 $ 15,697 Oil and natural gas proceeds due others 9,483 10,113 Other 181 636 Accrued liabilities: Compensation 1,984 2,664 Interest 2,609 2,933 Income taxes 477 655 Other 10 10 Derivative liabilities - 4,471 Asset retirement obligations 846 711 Long-term debt due within one year   122     126   Total current liabilities 33,516 38,016 DERIVATIVE LIABILITIES - 358 LONG-TERM DEBT 245,135 246,041 ASSET RETIREMENT OBLIGATIONS 27,182 26,363 OTHER LONG-TERM LIABILITIES 10 10 COMMITMENTS AND CONTINGENCIES 350 900   STOCKHOLDERS' EQUITY (DEFICIT):

Common stock, $0.0001 par value, 100,000,000 shares authorized, 82,572,829 and 80,748,674, shares issued, 78,614,211 and 76,951,883 shares outstanding at June 30, 2010 and December 31, 2009, respectively

8 8 Additional paid-in capital 224,435 222,979 Treasury stock - 3,958,618 shares (3,796,791 shares at December 31,2009) at cost (6,515 ) (6,189 ) Accumulated deficit   (212,177 )   (217,324 ) Stockholders' equity (deficit)   5,751     (526 ) Total liabilities and stockholders' equity (deficit) $ 311,944   $ 311,162    

RAM Energy Resources, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

    Six months ended June 30, 2010   2009 OPERATING ACTIVITIES: Net income (loss) $ 5,147 $ (42,643 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities- Depreciation and amortization 13,605 16,468 Amortization of deferred loan costs and Senior Notes discount 1,044 641 Non-cash interest 1,543 - Accretion expense 836 936 Impairment - 47,613 Unrealized (gain) loss on derivatives and premium amortization (2,997 ) 25,633 Deferred income tax provision (benefit) 268 (23,911 ) Other expense (income) (550 ) 448 Share-based compensation 1,471 1,093 (Gain) loss on disposal of other property, equipment and subsidiary (41 ) 96 Changes in operating assets and liabilities Accounts receivable 3,237 444 Prepaid expenses, inventory and other assets 657 144 Derivative premiums (2,866 ) (1,414 ) Accounts payable and proceeds due others 1,028 (6,200 ) Accrued liabilities and other (1,004 ) (18,046 ) Restricted cash - 16,000 Income taxes payable (177 ) (207 ) Asset retirement obligations   -     (181 ) Total adjustments   16,054     59,557   Net cash provided by operating activities   21,201     16,914   INVESTING ACTIVITIES: Payments for oil and natural gas properties and equipment (18,666 ) (17,746 ) Proceeds from sales of oil and natural gas properties 478 213 Payments for other property and equipment (358 ) (363 ) Proceeds from sales of other property and equipment   4     433   Net cash used in investing activities   (18,542 )   (17,463 ) FINANCING ACTIVITIES: Payments on long-term debt (24,576 ) (13,081 ) Proceeds from borrowings on long-term debt 22,132 18,000 Payments for deferred loan costs - (2,324 ) Stock repurchased   (326 )   (6 ) Net cash (used in) provided by financing activities   (2,770 )   2,589   INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (111 ) 2,040 CASH AND CASH EQUIVALENTS, beginning of period   129     164   CASH AND CASH EQUIVALENTS, end of period $ 18   $ 2,204   SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for income taxes $ 565   $ 270   Cash paid for interest $ 9,107   $ 6,788   DISCLOSURE OF NON CASH INVESTING AND FINANCING ACTIVITIES: Asset retirement obligations $ 118   $ 984   Payment-in-kind interest $ 1,543   $ 43    

RAM Energy Resources, Inc.

Production by Area

      Mature   Mature   Developing Fields Oil Fields* Natural Gas Fields   Three Months Ended June 30, 2010 South Texas   Barnett Shale   Appalachia Various Various Total Aggregate Net Production     Oil (MBbls) 9 1 - 214 29 253 NGLs (MBbls) 25 28 - 16 22 91 Natural Gas (MMcf) 443     164     14   60   549   1,230   MBoe 107     57     2   240   143   549     Three Months Ended June 30, 2009 Aggregate Net Production Oil (MBbls) 14 2 1 242 31 290 NGLs (MBbls) 28 27 - 22 19 96 Natural Gas (MMcf) 502     171     22   277   631   1,603   MBoe 125     57     4   310   156   652     Change in MBoe (18 ) (0 ) (2 ) (70 ) (13 ) (103 ) Percentage Change in MBoe -14.4 % 0.0 % -50.0 % -22.6 % -8.3 % -15.8 %     Mature Mature Developing Fields Oil Fields* Natural Gas Fields  

Six Months Ended June 30, 2010

South Texas   Barnett Shale   Appalachia Various Various Total Aggregate Net Production Oil (MBbls)

22

3

-

432

53

510

NGLs (MBbls)

60

59

-

29

41

189

Natural Gas (MMcf)

984

   

336

   

28

 

116

 

1,035

 

2,499

  MBoe

246

   

118

   

4

 

480

 

267

 

1,115

   

Six Months Ended June 30, 2009

Aggregate Net Production Oil (MBbls)

33

4

1

493

49

580

NGLs (MBbls)

56

62

-

42

39

199

Natural Gas (MMcf)

1,022

   

409

   

45

 

395

 

1,299

 

3,170

  MBoe

260

   

134

   

8

 

601

 

305

 

1,308

    Change in MBoe

(14

)

(16

)

(4

)

(121

)

(38

)

(193

) Percentage Change in MBoe

-5.4

%

-11.9

%

-50.0

%

-20.1

%

-12.5

%

-14.8

%  

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

 

RAM Energy Resources, Inc.

Production and Prices Summary

    Three Months Ended   Six Months Ended June 30, 2010 June 30, 2010     Production volumes: Oil (MBbls) 253 510 NGLs (MBbls) 91 189 Natural gas (MMcf) 1,230 2,499 Total (Mboe) 549 1,115   Average sale prices received: Oil (per Bbl) $ 75.57 $ 75.70 NGLs (per Bbl) $ 36.04 $ 38.15 Natural gas (per Mcf) $ 3.92 $ 4.50 Total per Boe $ 49.58 $ 51.18   Cash effect of derivative contracts: Oil (per Bbl) $ (3.73 ) $ (3.79 ) NGLs (per Bbl) $ 0.00 $ 0.00 Natural gas (per Mcf) $ 0.19 $ 0.13 Total per Boe $ (1.29 ) $ (1.44 )  

Average prices computed after cash effect of settlement of derivative contracts:

Oil (per Bbl) $ 71.84 $ 71.91 NGLs (per Bbl) $ 36.04 $ 38.15 Natural gas (per Mcf) $ 4.11 $ 4.63 Total per Boe $ 48.29 $ 49.74   Cash expenses (per Boe): Oil and natural gas production taxes $ 2.65 $ 2.73 Oil and natural gas production expenses $ 15.78 $ 14.87 General and administrative $ 7.27 $ 6.96 Interest $ 8.67 $ 8.17 Taxes $ 0.91   $ 0.51   Total per Boe $ 35.28 $ 33.24   Cash Flow per Boe $ 13.01   $ 16.50  

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 legal settlement changes. 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.

000s, except per share amounts   3 Mos Ended   3 Mos Ended       6 Mos Ended   6 Mos Ended 6/30/2010 6/30/2009 6/30/2010 6/30/2009   Modified EBITDA: Net income (loss) $ 2,729 $ (13,285 ) $ 5,147 $ (42,643 ) Plus: Interest expense $ 4,414 $ 3,216 $ 8,762 $ 6,525 Plus: PIK interest $ 778 $ 43 $ 1,543 $ 43 Plus: Amortization of deferred loan costs $ 522 $ 342 $ 1,044 $ 641 Plus: Depreciation, amortization and accretion $ 7,345 $ 8,718 $ 14,441 $ 17,404 Plus: Share-based compensation $ 785 $ 552 $ 1,471 $ 1,093 Plus: Income tax provision (benefit) $ (1,140 ) $ (3,055 ) $ 655 $ (23,848 ) Plus: Legal settlement changes $ (550 ) $ - $ (550 ) $ 448 Plus: Impairment charges $ - $ - $ - $ 47,613 Less: Unrealized (gain) loss on derivatives $ (2,419 )   $ 23,795   $ (4,354 )   $ 24,802     Modified EBITDA $ 12,464 $ 20,326 $ 28,159 $ 32,078   Less:   Cash paid for interest $ 4,760 $ 3,338 $ 9,107 $ 6,788 Cash paid for income tax $ 501 $ 121 $ 565 $ 270               Free cash flow $ 7,203     $ 16,867   $ 18,487     $ 25,020     Weighted average shares outstanding - basic 78,446 74,696 78,223 75,986 Weighted average shares outstanding - diluted 78,446 74,696 78,223 75,986   Free cash flow per share - basic $ 0.09 $ 0.23 $ 0.24 $ 0.33 Free cash flow per share - diluted $ 0.09 $ 0.23 $ 0.24 $ 0.33     Adjusted net income: (1) Net income (loss) $ 2,729 $ (13,285 ) $ 5,147 $ (42,643 )   Plus: Tax affected impairment charge $ - $ - $ - $ 30,327   Plus: Tax affected legal changes $ (341 ) $ - $ (341 ) $ 278   Plus: Tax affected unrealized (gain)loss on derivatives $ (1,499 )   $ 14,753   $ (2,699 )   $ 15,377     Adjusted net income $ 889     $ 1,468   $ 2,107     $ 3,339     Weighted average shares outstanding - basic 78,446 74,696 78,223 75,986 Weighted average shares outstanding - diluted 78,446 74,696 78,223 75,986   Adjusted net income per share - basic $ 0.01 $ 0.02 $ 0.03 $ 0.04 Adjusted net income per share - diluted $ 0.01 $ 0.02 $ 0.03 $ 0.04  

(1) Comparability between years is partially compromised due to the differing tax rates associated with each period.