RAME Ram Energy Resources, Inc. (MM)

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

RAM Reports 3Q 2010 Net Income of $1.6 Million

For the quarter ended September 30, 2010, RAM reported net income of $1.6 million, or $0.02 per share, based on 78.6 million diluted weighted average shares outstanding compared to a loss of $3.1 million, or $0.04 a share, on 74.5 million shares outstanding in the year-ago quarter. For the third quarter 2010, RAM’s adjusted net income to common shareholders (a non-GAAP measure) was $444,000, 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 other items. The adjusted net loss for the third quarter 2009 was $2.3 million, or $0.03 per share.

Modified EBITDA and Free Cash Flow

Modified EBITDA (a non-GAAP measure) was $12.0 million for the third quarter, compared with $11.1 million in last year’s quarter. Similarly, free cash flow (a non-GAAP measure) was $7.5 million, or $0.10 per share, for this year’s third quarter compared to $8.7 million, or $0.12 per share, in last year’s third quarter.

Commodity Prices and Revenues

Third quarter production totaled 541 thousand barrel of oil equivalents (BOE), down marginally from second quarter 2010 production of 549 thousand BOE, principally the result of natural production declines and offline wells resulting from weather related disruptions in the second quarter. Although offline wells were gradually returned to production, the timing and impact were insufficient to offset natural declines. Further, RAM experienced a shortage of fracturing and stimulation crews and equipment which continued to delay initiation of production from wells drilled in South Texas and hampered planned efforts to offset the natural decline in production. Third quarter 2010 production was down 14% compared to the 630 thousand BOE in the third quarter 2009.

The company’s realized price for oil increased 13% to an average of $74.05 per barrel in the third quarter of 2010 compared with last year’s third quarter average realized price of $65.74 per barrel. Similarly, the company’s realized price for natural gas rose 31% to an average of $4.05 per thousand cubic feet (Mcf) compared to an average of $3.10 per Mcf in the third quarter of 2009. In addition, the price of NGLs grew 24%, averaging $35.71 per barrel for this year’s third quarter. The positive impact from the 19% increase in total average price per BOE in the third quarter of 2010 was sufficient to fully offset the impact of the decline in production, allowing oil and gas revenue for the third quarter to rise to $26.5 million, compared to $25.9 million in the year-ago third quarter.

Derivative activity resulted in a net $569,000 gain in the third quarter 2010 and was comprised of realized losses from contract settlements and premium costs of $1.2 million and offsetting unrealized MTM gains of $1.8 million. As a result, total revenues for the quarter rose to $27.1 million. Derivative activity in last year’s third quarter totaled a net loss of $800,000, as the combination of $483,000 of realized gains was more than offset by unrealized losses of $1.3 million. These net derivative losses effectively reduced total revenues to $25.1 million in last year’s third quarter.

Costs and Expenses

Production expenses were $8.6 million in the third quarter of 2010, 12% below the $9.8 million in the previous year’s quarter due primarily to decreased production volumes in the 2010 period and lower chemical costs. Production taxes were $1.5 million in this year’s third quarter, up 15% compared to production taxes of $1.3 million in the same quarter last year, primarily due to higher hydrocarbon prices during 2010. General and administrative expenses were $2.9 million in the current quarter, a 31% decline compared to $4.2 million in last year’s third quarter and a testament to the company’s continuing cost containment efforts.

Proceeds From Asset Sale Target Debt Reduction

Consistent with RAM’s stated objective to deleverage the company through targeted asset sales, on November 1, 2010 the company announced it had signed an agreement effecting the strategic divestiture of RAM’s North Texas Barnett Shale and Boonsville properties to a private E&P company for $43.75 million in cash. Proceeds from the transaction, which is anticipated to close in early December 2010, are aimed at reducing its outstanding balances of debt. Concomitantly, RAM is evaluating alternatives for the refinancing the company’s remaining debt.

As of September 30, 2010, RAM’s outstanding borrowings under its credit facility totaled $246.8 million, of which term debt was $113.3 million and $133.5 million was drawn on its revolver, which is currently subject to a $165.0 million borrowing base. Outstanding borrowings under the facility at September 30, 2009 totaled $250.2 million.

Interest expense for the third quarter 2010 was $5.8 million compared to $5.6 million in the year-ago quarter. Similarly, the blended interest rate on borrowings was 8.2% in the third quarter compared to the blended rate in last year’s quarter of 8.9%. The increase in interest expense was due to higher average outstanding borrowings throughout the 2010 period.

Nine Month 2010 Results

Nine month production totaled 1.7 million BOE, down 15% from production in the nine months of 2009 of 1.9 million BOE, resulting primarily from weather-related interruptions in both the first and second quarters of 2010 and natural production declines. In addition, the continued shortage of fracturing and stimulation crews and equipment which delayed bringing South Texas wells online hampered planned efforts to offset natural declines. Net income for the nine months ended September 30, 2010 was $6.7 million, or $0.09 per share compared to a loss of $45.8 million, or a loss of $0.61 per share, in the year-ago period. Modified EBITDA (a non-GAAP measure) was $40.2 million for the nine months of 2010 compared to $43.2 million for the same period last year. Free cash flow (a non-GAAP measure) for the first nine months of 2010 was $26.0 million, or $0.33 per share, compared to $33.7 million, or $0.45 per share, for the same period last year.

RAM to Webcast Third Quarter 2010 Conference Call

The company’s teleconference call to review third quarter results will be broadcast live on a listen-only basis over the internet on Monday, November 8 at 11 a.m. Eastern 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 800.901.5241 (domestic) or 617.786.2963 (international) and providing the call identifier “37071790” 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 November 15, 2010 by dialing 888.286.8010 (domestic) or 617.801.6888 (international) and using pass code “48125977”.

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, which address targets or plans for 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 Balance Sheets

(in thousands, except share and per share amounts)

  September 30, December 31, 2010 2009 (unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 29 $ 129 Accounts receivable: Oil and natural gas sales, net of allowance of $50 ($50 at December 31, 2009) 9,844 12,585 Joint interest operations, net of allowance of $479 ($641 at December 31, 2009) 547 1,303 Income taxes 119 - Other, net of allowance of $48 ($48 at December 31, 2009) 754 193 Derivative assets 2,385 - Prepaid expenses 1,027 1,970 Deferred tax asset 3,976 3,531 Inventory 3,372 3,900 Other current assets   911     27   Total current assets 22,964 23,638 PROPERTIES AND EQUIPMENT, AT COST: Proved oil and natural gas properties and equipment, using full cost accounting 729,441 702,502 Other property and equipment   9,928     9,337   739,369 711,839 Less accumulated depreciation, amortization and impairment   (482,797 )   (462,541 ) Total properties and equipment 256,572 249,298 OTHER ASSETS: Deferred tax asset 32,061 31,573 Derivative assets 383 - Deferred loan costs, net of accumulated amortization of $4,490 ($2,924 at December 31, 2009) 3,131 4,697 Other   946     1,956   Total assets $ 316,057   $ 311,162   LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Accounts payable: Trade $ 18,335 $ 15,697 Oil and natural gas proceeds due others 9,638 10,113 Other 80 636 Accrued liabilities: Compensation 1,230 2,664 Interest 2,650 2,933 Income taxes 182 655 Other 336 10 Derivative liabilities - 4,471 Asset retirement obligations 731 711 Long-term debt due within one year   124     126   Total current liabilities 33,306 38,016 DERIVATIVE LIABILITIES - 358 LONG-TERM DEBT 247,012 246,041 ASSET RETIREMENT OBLIGATIONS 27,617 26,363 OTHER LONG-TERM LIABILITIES 10 10 COMMITMENTS AND CONTINGENCIES - 900   STOCKHOLDERS' EQUITY (DEFICIT): Common stock, $0.0001 par value, 100,000,000 shares authorized, 82,597,829 and 80,748,674 shares issued, 78,636,524 and 76,951,883 shares outstanding at September 30, 2010 and December 31, 2009, respectively 8 8 Additional paid-in capital 225,237 222,979 Treasury stock - 3,961,305 shares (3,796,791 shares at December 31,2009) at cost (6,520 ) (6,189 ) Accumulated deficit   (210,613 )   (217,324 ) Stockholders' equity (deficit)   8,112     (526 ) Total liabilities and stockholders' equity (deficit) $ 316,057   $ 311,162        

RAM Energy Resources, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share amounts)

(unaudited)

  Three months ended September 30,

Nine months ended September 30,

2010   2009 2010   2009 REVENUES AND OTHER OPERATING INCOME: Oil and natural gas sales Oil $ 18,290 $ 18,276 $ 56,898 $ 45,740 Natural gas 4,923 4,607 16,170 15,564 NGLs   3,250     2,999     10,461     7,134   Total oil and natural gas sales 26,463 25,882 83,529 68,438 Realized gains (losses) on derivatives (1,213 ) 483 (2,818 ) 19,032 Unrealized gains (losses) on derivatives 1,782 (1,283 ) 6,136 (26,085 ) Other   51     49     125     177   Total revenues and other operating income 27,083 25,131 86,972 61,562   OPERATING EXPENSES: Oil and natural gas production taxes 1,518 1,320 4,565 3,119 Oil and natural gas production expenses 8,571 9,772 25,153 28,976 Depreciation and amortization 6,782 7,909 20,387 24,377 Accretion expense 452 513 1,288 1,449 Impairment - - - 47,613 Share-based compensation 813 539 2,284 1,632 General and administrative, overhead and other expenses, net of operator's overhead fees   2,932     4,247     10,694     12,337   Total operating expenses   21,068     24,300     64,371     119,503   Operating income (loss) 6,015 831 22,601 (57,941 )   OTHER INCOME (EXPENSE): Interest expense (5,767 ) (5,561 ) (17,116 ) (12,770 ) Interest income 20 40 24 69 Other income (expense)   (268 )   10     293     (529 ) EARNINGS (LOSS) BEFORE INCOME TAXES - (4,680 ) 5,802 (71,171 ) INCOME TAX BENEFIT   (1,564 )   (1,561 )   (909 )   (25,409 ) Net earnings (loss) $ 1,564   $ (3,119 ) $ 6,711   $ (45,762 )   BASIC EARNINGS (LOSS) PER SHARE $ 0.02   $ (0.04 ) $ 0.09   $ (0.61 ) BASIC WEIGHTED AVERAGE SHARES OUTSTANDING   78,633,535     74,505,534     78,361,299     75,487,262     DILUTED EARNINGS (LOSS) PER SHARE $ 0.02   $ (0.04 ) $ 0.09   $ (0.61 ) DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING   78,633,535     74,505,534     78,361,299     75,487,262    

RAM Energy Resources, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

  Nine months ended September 30, 2010   2009 OPERATING ACTIVITIES: Net income (loss) $ 6,711 $ (45,762 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities- Depreciation and amortization 20,387 24,377 Amortization of deferred loan costs and Senior Notes discount 1,566 1,120 Non-cash interest 2,336 829 Accretion expense 1,288 1,449 Impairment - 47,613 Unrealized (gain) loss on derivatives and premium amortization (3,859 ) 27,242 Deferred income tax benefit (933 ) (25,690 ) Share-based compensation 2,284 1,632 (Gain) loss on disposal of other property, equipment and subsidiary (38 ) 89 Other expense (income) (574 ) 448 Changes in operating assets and liabilities- Accounts receivable 3,023 166 Prepaid expenses, inventory and other assets 1,598 1,137 Derivative premiums (3,738 ) (1,781 ) Accounts payable and proceeds due others 1,603 (13,915 ) Accrued liabilities and other (1,717 ) (15,468 ) Restricted cash - 16,000 Income taxes payable (473 ) (176 ) Asset retirement obligations   (161 )   (287 ) Total adjustments   22,592     64,785   Net cash provided by operating activities   29,303     19,023   INVESTING ACTIVITIES: Payments for oil and natural gas properties and equipment (27,476 ) (21,728 ) Proceeds from sales of oil and natural gas properties 478 6,156 Payments for other property and equipment (721 ) (504 ) Proceeds from sales of other property and equipment   4     433   Net cash used in investing activities   (27,715 )   (15,643 ) FINANCING ACTIVITIES: Payments on long-term debt (37,618 ) (24,120 ) Proceeds from borrowings on long-term debt 36,261 23,022 Payments for deferred loan costs - (2,324 ) Stock repurchased   (331 )   (6 ) Net cash used in financing activities   (1,688 )   (3,428 ) DECREASE IN CASH AND CASH EQUIVALENTS (100 ) (48 ) CASH AND CASH EQUIVALENTS, beginning of period   129     164   CASH AND CASH EQUIVALENTS, end of period $ 29   $ 116   SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for income taxes $ 616   $ 457   Cash paid for interest $ 13,518   $ 9,011   DISCLOSURE OF NON CASH INVESTING AND FINANCING ACTIVITIES: Asset retirement obligations $ 147   $ 115   Payment-in-kind interest $ 2,336   $ 829   Receipt of common stock for settlement of contingent receivable $ -   $ 2,134                              

RAM Energy Resources, Inc.

Production by Area

  Mature Mature Developing Fields Oil Fields* Natural Gas Fields   South Texas     Barnett Shale     Appalachia Various Various Total Three Months Ended September 30, 2010 Aggregate Net Production Oil (MBbls) 11 1 - 205 30 247 NGLs (MBbls) 34 21 - 15 21 91 Natural Gas (MMcf) 511     127     12 61 504 1,215 MBoe 130     43     2 231 135 541   Three Months Ended September 30, 2009 Aggregate Net Production Oil (MBbls) 12 2 - 233 31 278 NGLs (MBbls) 31 32 - 20 21 104 Natural Gas (MMcf) 525     195     21 135 612 1,488 MBoe 130     67     4 275 154 630   Change in MBoe - (24) (2) (44) (19) (89) Percentage Change in MBoe 0.0% -35.8% -50.0% -16.0% -12.3% -14.1%                                 Mature Mature Developing Fields Oil Fields* Natural Gas Fields   South Texas     Barnett Shale     Appalachia Various Various Total Nine Months Ended September 30, 2010 Aggregate Net Production Oil (MBbls) 33 4 - 637 83 757 NGLs (MBbls) 94 80 - 44 62 280 Natural Gas (MMcf) 1,495     463     40 177

1,539

3,714 MBoe 376     161     6 711 402 1,656   Nine Months Ended September 30, 2009 Aggregate Net Production Oil (MBbls) 45 6 1 726 80 858 NGLs (MBbls) 87 94 - 62 60 303 Natural Gas (MMcf) 1,547     604     66 530 1,911 4,658 MBoe 390     201     12 876 459 1,938   Change in MBoe (14) (40) (6) (165) (57) (282) Percentage Change in MBoe -3.6% -19.9% -50.0% -18.8% -12.4% -14.6%    

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

   

RAM Energy Resources, Inc.

Production and Prices Summary

  Three months ended Nine months ended September 30, 2010 September 30, 2010   Production volumes: Oil (MBbls) 247 757 NGLs (MBbls) 91 280 Natural gas (MMcf) 1,215 3,714 Total (MBoe) 541 1,656   Average sale prices received: Oil (per Bbl) $ 74.05 $ 75.16 NGLs (per Bbl) $ 35.71 $ 37.36 Natural gas (per Mcf) $ 4.05 $ 4.35 Total per Boe $ 48.91 $ 50.44   Cash effect of derivative contracts: Oil (per Bbl) ($4.68 ) ($4.08 ) NGLs (per Bbl) - - Natural gas (per Mcf) ($0.05 ) $ 0.07 Total per Boe ($2.24 ) ($1.70 )   Average prices computed after cash effect of settlement of derivative contracts: Oil (per Bbl) $ 69.37 $ 71.08 NGLs (per Bbl) $ 35.71 $ 37.36 Natural gas (per Mcf) $ 4.00 $ 4.42 Total per Boe $ 46.67 $ 48.74   Cash expenses (per Boe): Oil and natural gas production taxes $ 2.81 $ 2.76 Oil and natural gas production expenses $ 15.84 $ 15.19 General and administrative $ 5.42 $ 6.46 Interest $ 8.15 $ 8.16 Taxes $ 0.09   $ 0.37   Total per Boe $ 32.31 $ 32.94   Cash flow per Boe $ 14.36 $ 15.80  

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 adjusting net income (loss) for the following: 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, legal settlement proceeds 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 Qtr Ended Qtr Ended 9 Mos Ended 9 Mos Ended 9/30/2010 9/30/2009 9/30/2010 9/30/2009   Modified EBITDA: Net income (loss) $ 1,564 $ (3,119 ) $ 6,711 $ (45,762 ) Adjustments: Interest expense $ 4,452 $ 4,253 $ 13,214 $ 10,821 PIK interest $ 793 $ 786 $ 2,336 $ 829 Amortization of deferred loan costs $ 522 $ 522 $ 1,566 $ 1,120 Depreciation, amortization and accretion $ 7,234 $ 8,422 $ 21,675 $ 25,826 Share-based compensation $ 813 $ 539 $ 2,284 $ 1,632 Income tax provision (benefit) $ (1,564 ) $ (1,561 ) $ (909 ) $ (25,409 ) Legal settlement proceeds $ (24 ) $ - $ (574 ) $ 448 Impairment charges $ - $ - $ - $ 47,613 Unrealized (gain) loss on derivatives $ (1,782 )   $ 1,283   $ (6,136 )   $ 26,085     Modified EBITDA $ 12,008 $ 11,125 $ 40,167 $ 43,203   Less:   Cash paid for interest $ 4,411 $ 2,223 $ 13,518 $ 9,011 Cash paid for income tax $ 51 $ 187 $ 616 $ 457               Free cash flow $ 7,546     $ 8,715   $ 26,033     $ 33,735     Weighted average shares outstanding - basic 78,634 74,506 78,361 75,487 Weighted average shares outstanding - diluted 78,634 74,506 78,361 75,487   Free cash flow per share - basic $ 0.10 $ 0.12 $ 0.33 $ 0.45 Free cash flow per share - diluted $ 0.10 $ 0.12 $ 0.33 $ 0.45     Adjusted net income (loss): (1) Net income (loss) $ 1,564 $ (3,119 ) $ 6,711 $ (45,762 ) Adjustments: Tax affected impairment charges $ - $ - $ - $ 30,327   Tax affected legal settlement proceeds $ (15 ) $ - $ (356 ) $ 278   Tax affected unrealized (gain)loss on derivatives $ (1,105 )   $ 795   $ (3,804 )   $ 16,173     Adjusted net income (loss) $ 444     $ (2,324 ) $ 2,551     $ 1,016     Weighted average shares outstanding - basic 78,634 74,506 78,361 75,487 Weighted average shares outstanding - diluted 78,634 74,506 78,361 75,487   Adjusted net income (loss) per share - basic $ 0.01 $ (0.03 ) $ 0.03 $ 0.01 Adjusted net income (loss) per share - diluted $ 0.01 $ (0.03 ) $ 0.03 $ 0.01    

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