RAME Ram Energy Resources, Inc. (MM)

RAM Energy Resources, Inc. (Nasdaq: RAME) today announced fourth quarter and year ended December 31, 2010 earnings and financial results.

2010 Highlights

• Debt reduced to $196.7 million from $250 million at mid-year
• $51.7 million (before closing adjustments) of non-core property sales with proceeds used to reduce debt
• Free cash flow was $32.6 million, or $0.42 per share, fully funding the capital budget and a reduction in long term debt
• G&A expenses dropped nearly $2.0 million to $14.8 million

“In mid-year it became clear that a bold step was required and accordingly we adopted a program to review strategic alternatives aimed at increasing shareholder value. We sold non-core, largely natural gas producing assets and substantially reduced our debt. These actions paved the way for a refinancing of our debt, completed in March 2011. This refinancing extended the maturity of our outstanding debt, substantially improved our financial flexibility and reduced our anticipated interest expense. We are thus well positioned to take advantage of growth opportunities in our major oil producing fields and in our Osage Mississippi oil concession,” said Larry Lee, Chairman and CEO.

Financial Results for the 2010 Year

Revenues and Production

Oil and natural gas sales for the year totaled $111.0 million, up 13% from $98.2 million in 2009. The average price of each of RAM’s hydrocarbon products were up across the board with the average price per BOE up 33% for the year. The average price realized for oil rose 32%, the price for natural gas liquids ( NGLs) increased 43% and the price received for natural gas was higher by 21%. Total production for the year was 2.2 million BOE. This 15% decrease from the prior year was principally a function of the company’s reduction of planned capital expenditures which resulted in natural production declines not being offset by increased drilling. Weather interruptions early in the year and delays in bringing production online in South Texas, where competition for fracturing and stimulation crews and equipment was intense, also contributed to the overall decline. However, the positive impact of the rise in hydrocarbon prices more than offset the negative impact from lower production volumes.

Costs and Expenses

Due to cost saving measures implemented during the year, production expense decreased by 10% to $33.9 million. General and administrative expenses declined 11% to $14.8 million, primarily due to lower professional fees and employee costs. Production taxes rose 14% to $6.1 million, primarily as a result of higher hydrocarbon prices during the year. Interest expense increased 22% to $22.7 million, the product of higher effective interest rates for the entirety of 2010 compared with substantially lower interest rates during the first half of the 2009 year prior to RAM amending its credit facility.

RAM reported net income of $2.4 million, or $0.03 per share, for the 2010 year compared to a net loss of $58.4 million, or $0.75 a share, in 2009.

Modified EBITDA for the 2010 year was $51.0 million, 13% below the $58.3 million in 2009. Similarly, free cash flow was $32.6 million, or $0.42 per share, for the 2010 year compared to $44.6 million, or $0.57 per share, for 2009.

Fourth Quarter 2010 Financial Results

Oil and natural gas sales for the quarter totaled $27.5 million compared to $29.7 million in the year-ago quarter. A 10% higher average price per BOE of $54.37, driven by a 13% higher average price for oil and a 15% higher average price for NGLs, compared favorably to the average price per BOE of $49.22 in the fourth quarter of 2009. The higher average price per BOE in the fourth quarter 2010 largely offset the 16% decline in production to 505,000 BOE.

Production taxes fell 32% to $1.5 million as a result of lower production more than offsetting the impact of higher average prices for oil and NGLs in the 2010 quarter compared to the year-ago quarter. Production expenses rose 3% to $8.7 million compared to the same period in 2009. Interest expense decreased 5% to $5.5 million compared to $5.8 million in the fourth quarter of last year, principally a result of lower outstanding borrowings resulting from debt reduction associated with asset sales and a lower blended interest rate.

For the fourth quarter ended December 31, 2010, RAM recorded a loss of $4.3 million, or $0.05 per share, compared to a loss of $12.6 million, or $0.16 per share, in the year ago quarter. The current year fourth quarter included $2.4 million in realized derivative losses which primarily reflect the risk-adjustment modification of the company’s hedge portfolio after the $51.7 million gross proceeds from the sale of non-core properties in December.

Modified EBITDA (a non-GAAP measure) was $10.8 million for the fourth quarter, compared with $15.1 million in last year’s quarter. Similarly, free cash flow (a non-GAAP measure) was $6.6 million, or $0.08 per share, for this year’s fourth quarter compared to $10.8 million, or $0.14 per share, in last year’s fourth quarter.

RAM to Webcast Conference Call to Review Fourth Quarter and Year-End 2010 Results

The company’s teleconference call to review fourth quarter and year-end 2010 results will be broadcast live on a listen-only basis over the internet on Wednesday, March 16, at 10:00 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)202-4367 (domestic) or (617)213-8845 (international) and providing the call pass code “21516029” to the operator. An audio replay will be available until March 23, 2011 by dialing (888)286-8010 (domestic) or (617)801-6888 (international) and using call pass code “36771245”.

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 capital spending, prices of oil and gas and company realizations, drilling activities 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.

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

  As of December 31, 2010     2009 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 37 $ 129 Accounts receivable: Oil and natural gas sales, net of allowance of $50 ($50 at December 31, 2009) 9,797 12,585 Joint interest operations, net of allowance of $479 ($641 at December 31, 2009) 631 1,303 Other, net of allowance of $48 ($48 at December 31, 2009) 155 193 Derivative assets 1,340 - Prepaid expenses 1,657 1,970 Deferred tax asset 3,526 3,531 Inventory 3,382 3,900 Other current assets   4     27   Total current assets 20,529 23,638 PROPERTIES AND EQUIPMENT, AT COST: Proved oil and natural gas properties and equipment, using full cost accounting 689,472 702,502 Other property and equipment   10,072     9,337   699,544 711,839 Less accumulated depreciation, amortization and impairment   (489,634 )   (462,541 ) Total properties and equipment 209,910 249,298 OTHER ASSETS: Deferred tax asset 31,001 31,573 Deferred loan costs, net of accumulated amortization of $5,012 ($2,924 at December 31, 2009) 2,609 4,697 Other   952     1,956   Total assets $ 265,001   $ 311,162   LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Accounts payable: Trade $ 17,149 $ 15,697 Oil and natural gas proceeds due others 9,414 10,113 Other 452 636 Accrued liabilities: Compensation 1,948 2,664 Interest 2,448 2,933 Income taxes 699 655 Other 10 10 Derivative liabilities - 4,471 Asset retirement obligations 639 711 Long-term debt due within one year   127     126   Total current liabilities 32,886 38,016 DERIVATIVE LIABILITIES 203 358 LONG-TERM DEBT 196,965 246,041 ASSET RETIREMENT OBLIGATIONS 30,770 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, 78,386,983 and 76,951,883 shares outstanding at December 31, 2010 and 2009, respectively 8 8 Additional paid-in capital 226,042 222,979 Treasury stock - 4,210,846 shares (3,796,791 shares at December 31,2009) at cost (6,976 ) (6,189 ) Accumulated deficit   (214,907 )   (217,324 ) Stockholders' equity (deficit)   4,167     (526 ) Total liabilities and stockholders' equity (deficit) $ 265,001   $ 311,162        

RAM Energy Resources, Inc.

Consolidated Statements of Operations

(in thousands, except share and per share amounts)

  Three months ended December 31, Years ended December 31, 2010     2009 2010     2009 REVENUES AND OTHER OPERATING INCOME: Oil and natural gas sales Oil $ 19,665 $ 20,541 $ 76,563 $ 66,281 Natural gas 4,095 5,254 20,265 20,818 NGLs   3,695     3,934     14,156     11,068   Total oil and natural gas sales 27,455 29,729 110,984 98,167 Realized gains (losses) on derivatives (2,375 ) 223 (5,193 ) 19,255 Unrealized gains (losses) on derivatives 250 (4,476 ) 6,386 (30,561 ) Other   32     40     157     217   Total revenues and other operating income 25,362 25,516 112,334 87,078   OPERATING EXPENSES: Oil and natural gas production taxes 1,498 2,201 6,063 5,320 Oil and natural gas production expenses 8,738 8,479 33,891 37,455 Depreciation and amortization 6,838 7,273 27,225 31,650 Accretion expense 239 527 1,527 1,976 Impairment - - - 47,613 Share-based compensation 826 547 3,110 2,179 General and administrative, overhead and other expenses, net of operator's overhead fees   4,105     4,330     14,799     16,667   Total operating expenses   22,244     23,357     86,615     142,860   Operating income (loss) 3,118 2,159 25,719 (55,782 )   OTHER INCOME (EXPENSE): Interest expense (5,539 ) (5,820 ) (22,655 ) (18,590 ) Interest income 3 13 27 82 Other income (expense)   28     89     321     (440 ) INCOME (LOSS) BEFORE INCOME TAXES (2,390 ) (3,559 ) 3,412 (74,730 ) INCOME TAX PROVISION (BENEFIT)   1,904     9,062     995     (16,347 ) Net income (loss) $ (4,294 ) $ (12,621 ) $ 2,417   $ (58,383 )   BASIC INCOME (LOSS) PER SHARE $ (0.05 ) $ (0.16 ) $ 0.03   $ (0.75 ) BASIC WEIGHTED AVERAGE SHARES OUTSTANDING   78,618,703     76,876,320     78,426,179     77,601,057     DILUTED INCOME (LOSS) PER SHARE $ (0.05 ) $ (0.16 ) $ 0.03   $ (0.75 ) DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING   78,618,703     76,876,320     78,426,179     77,601,057    

RAM Energy Resources, Inc.

Consolidated Statements of Cash Flows

(in thousands)

  Years ended December 31, 2010     2009     2008 OPERATING ACTIVITIES: Net income (loss) $ 2,417 $ (58,383 ) $ (129,953 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities-

 

Depreciation and amortization 27,225 31,650 46,512 Amortization of deferred loan costs 2,088 1,642 1,197 Non-cash interest 3,086 1,605 - Accretion expense 1,527 1,976 2,207 Impairment - 47,613 269,886 Unrealized (gain) loss on derivatives, net of premium amortization (1,498 ) 32,147 (31,762 ) Deferred income tax provision (benefit) 577 (16,865 ) (92,595 ) Other expense (income) (574 ) 448 13,184 Share-based compensation 3,110 2,179 2,563 Loss (gain) on disposal of other property, equipment and subsidiary (38 ) 35 180 Undistributed losses on investment - - 165 Changes in operating assets and liabilities, net of acquisitions Accounts receivable 3,704 (650 ) 4,168 Prepaid expenses, inventory and other assets 1,857 905 (4,283 ) Derivative premiums (4,468 ) (1,781 ) (2,288 ) Accounts payable and proceeds due others 543 (10,641 ) 14,606 Accrued liabilities and other (1,527 ) (15,387 ) (3,124 ) Restricted cash - 16,000 (16,000 ) Income taxes payable 44 256 231 Asset retirement obligations   (198 )   (377 )   (440 ) Total adjustments   35,458     90,755     204,407   Net cash provided by operating activities 37,875 32,372 74,454 INVESTING ACTIVITIES: Payments for oil and natural gas properties and equipment (33,535 ) (29,871 ) (84,723 ) Proceeds from sales of oil and natural gas properties 49,366 6,120 2,950 Payments for other property and equipment (865 ) (604 ) (1,275 ) Proceeds from sales of other property and equipment 4 434 23 Proceeds from sale of subsidiary, net of cash - - 308 Acquisition of Ascent, net of cash acquired - - 35 Other investments   -     -     114   Net cash provided by (used in) investing activities   14,970     (23,921 )   (82,568 ) FINANCING ACTIVITIES: Payments on long-term debt (98,490 ) (36,156 ) (175,306 ) Proceeds from borrowings on long-term debt 46,340 30,022 90,253 Payments for deferred loan costs - (2,324 ) (74 ) Stock repurchased (787 ) (28 ) (82 ) Warrants exercised   -     -     86,614   Net cash provided by (used in) financing activities (52,937 ) (8,486 ) 1,405 DECREASE IN CASH AND CASH EQUIVALENTS (92 ) (35 ) (6,709 ) CASH AND CASH EQUIVALENTS, beginning of year   129     164     6,873   CASH AND CASH EQUIVALENTS, end of year $ 37

 

$ 129   $ 164  

SUPPLEMENTAL CASH FLOW INFORMATION:

Cash paid for income taxes

$

380

 

$

303

 

$

682

 

Cash paid for interest

$

17,988

 

$

13,428

 

$

25,813

 

DISCLOSURE OF NON CASH INVESTING AND FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Asset retirement obligations

$

3,006

 

$

(4,724

)

$

787

 

Receipt of common stock for settlement of contingent receivable

$

-

 

$

2,134

 

$

-

 

                 

RAM Energy Resources, Inc.

Production by Area

  Texas Oklahoma Louisiana Other Total Year Ended December 31, 2010 Aggregate Net Production Oil (MBbls) 559 322 79 35 995 NGLs (MBbls) 341 10 - 13 364 Natural Gas (MMcf) 3,128 849 689 150 4,816 MBoe 1,421 473 194 73 2,161   Year Ended December 31, 2009 Aggregate Net Production Oil (MBbls) 664 356 83 35 1,138 NGLs (MBbls) 375 15 - 16 406 Natural Gas (MMcf) 3,821 1,266 743 164 5,994 MBoe 1,676 582 207 77 2,542   Change in MBoe (255) (109) (13) (4) (381) Percentage Change in MBoe -15.2% -18.7% -6.3% -5.2% -15.0%     Texas Oklahoma Louisiana Other Total Three Months Ended December 31, 2010 Aggregate Net Production Oil (MBbls) 134 78 17 9 238 NGLs (MBbls) 79 3 - 2 84 Natural Gas (MMcf) 688 205 175 34 1,102 MBoe 327 115 46 17 505   Three Months Ended December 31, 2009 Aggregate Net Production Oil (MBbls) 162 87 23 8 280 NGLs (MBbls) 96 3 - 4 103 Natural Gas (MMcf) 862 249 186 39 1,336 MBoe 402 131 54 17 604   Change in MBoe (75) (16) (8) - (99) Percentage Change in MBoe -18.7% -12.2% -14.8% 0.0% -16.4%                

RAM Energy Resources, Inc. Production and Prices Summary

 

  For the Three Months Ended Increase For Year Ended Increase December 31, (Decrease) December 31, (Decrease) 2010     2009 %   2010     2009 %         Production volumes: Oil (MBbls) 238 280 -15 % 995 1,138 -13 % NGL (MBbls) 84 103 -18 % 364 406 -10 % Natural gas (MMcf) 1,102 1,336 -18 % 4,816 5,994 -20 % Total (Mboe) 505 604 -16 % 2,161 2,542 -15 %   Average sale prices received: Oil (per Bbl) $ 82.63 $ 73.36 13 % $ 76.95 $ 58.24 32 % NGL (per Bbl) $ 43.99 $ 38.19 15 % $ 38.89 $ 27.26 43 % Natural gas (per Mcf) $ 3.72 $ 3.93 -5 % $ 4.21 $ 3.47 21 % Total per Boe $ 54.37 $ 49.22 10 % $ 51.36 $ 38.62 33 %   Cash effect of derivative contracts: Oil (per Bbl) $ (12.70 ) $ (1.70 ) 647 % $ (6.14 ) $ 4.94 -224 % NGL (per Bbl) $ - $ -

-

$ - $ - - Natural gas (per Mcf) $ 0.59 $ 0.52 13 % $ 0.19 $ 2.27 -92 % Total per Boe $ (4.70 ) $ 0.37 -1370 % $ (2.40 ) $ 7.57 -132 %   Average prices computed after cash effect of settlement of derivative contracts: Oil (per Bbl) $ 69.93 $ 71.66 -2 % $ 70.81 $ 63.18 12 % NGL (per Bbl) $ 43.99 $ 38.19 15 % $ 38.89 $ 27.26 43 % Natural gas (per Mcf) $ 4.31 $ 4.45 -3 % $ 4.40 $ 5.74 -23 % Total per Boe $ 49.67 $ 49.59 0 % $ 48.96 $ 46.19 6 %   Cash expenses (per Boe): Oil and natural gas production taxes $ 2.97 $ 3.64 -18 % $ 2.81 $ 2.09 34 % Oil and natural gas production expenses $ 17.30 $ 14.04 23 % $ 15.68 $ 14.73 6 % General and administrative $ 8.13 $ 7.17 13 % $ 6.85 $ 6.56 4 % Interest $ 8.85 $ 7.31 21 % $ 8.32 $ 5.28 58 % Taxes $ (0.47 ) $ (0.25 ) 88 % $ 0.18 $ 0.12 50 % Total per Boe $ 36.78 $ 31.91 15 % $ 33.84 $ 28.78 18 %  

RAM Energy Resources, Inc.

Modified EBITDA and Free Cash Flow

(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 and unrealized gains or losses on derivative or MTM settlement transactions. Free cash flow is also a non-GAAP measure representing modified EBITDA after adjustments for the cash portion of interest and income taxes. 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 which is 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 Year Ended Year Ended 12/31/2010 12/31/2009 12/31/2010 12/31/2009   Modified EBITDA: Net income (loss) $ (4,294 ) $ (12,621 ) $ 2,417 $ (58,383 ) Plus: Interest expense $ 4,267 $ 4,522 $ 17,481 $ 15,343 Plus: PIK interest $ 750 $ 776 $ 3,086 $ 1,605 Plus: Amortization of deferred loan costs $ 522 $ 522 $ 2,088 $ 1,642 Plus: Depreciation, amortization and accretion $ 7,077 $ 7,800 $ 28,752 $ 33,626 Plus: Share-based compensation $ 826 $ 547 $ 3,110 $ 2,179 Plus: Income tax provision (benefit) $ 1,904 $ 9,062 $ 995 $ (16,347 ) Plus: MTM legal settlement $ - $ - $ (574 ) $ 448 Plus: Impairment charges $ - $ - $ - $ 47,613 Less: Unrealized (gain) loss on derivatives $ (250 )     $ 4,476   $ (6,386 )     $ 30,561     Modified EBITDA $ 10,802 $ 15,084 $ 50,969 $ 58,287   Less:   Cash paid for interest $ 4,470 $ 4,417 $ 17,988 $ 13,428 Cash paid (received) for income tax $ (236 )     $ (154 ) $ 380       $ 303   Free cash flow $ 6,568       $ 10,821   $ 32,601       $ 44,556     Weighted average shares outstanding - basic 78,619 76,876 78,426 77,601 Weighted average shares outstanding - diluted 78,619 76,876 78,426 77,601   Free cash flow per share - basic $ 0.08 $ 0.14 $ 0.42 $ 0.57 Free cash flow per share - diluted $ 0.08 $ 0.14 $ 0.42 $ 0.57