Arena Resources Announces Record Financial and Operational Results for Fourth Quarter and Year End 2005
Friday March 17, 9:30 am ET
TULSA, Okla.--(BUSINESS WIRE)--March 17, 2006--Arena Resources Inc. (AMEX: ARD - News)
2005 Revenues Increase 205%
2005 Net Income Increases 286%
Arena Resources Inc. (AMEX: ARD - News; "Arena") announced today financial results for the fourth quarter and year ended Dec. 31, 2005. Arena had net income of $3,014,884, a 249% increase, on oil and gas revenues of $9,362,003, a 215% increase, for the fourth quarter compared to net income of $865,097 on revenues of $2,972,346 for the fourth quarter ended Dec. 31, 2004. For the year ended Dec. 31, 2005, Arena had net income of $9,460,683, a 286% increase, on revenues of $25,843,077, a 205% increase, as compared to net income of $2,451,652 on revenues of $8,482,130 for the year ended Dec. 31, 2004. Income attributable to common shares for the fourth quarter was $0.22 per diluted share compared to $0.09 for the fourth quarter ended Dec. 31, 2004. For the year ended Dec. 31, 2005, income attributable to common shares was $0.75 per diluted share compared to $0.28 per diluted share for the year ended Dec. 31, 2004. The increase in revenue is attributed to an increase in production, primarily due to development and acquisition activities, and an increase in commodity prices. Net income for the fourth quarter and the year 2005 included a pre-tax non-cash charge of $597,773 for warrants issued as part of a financing in July 2005.
Cash provided by operating activities, before changes in working capital, increased to $18,594,370 or $1.48 per diluted share for the year ended Dec. 31, 2005, from $5,085,918, or $0.59 per diluted share for the year ended Dec. 31, 2004. Earnings before interest, taxes, depletion and other non-cash items ("Adjusted EBITDA") was $18,823,994, as compared to $5,241,854 in 2004. (See accompanying table for a reconciliation of net income to adjusted EBITDA.)
Total net production for the fourth quarter of 2005 was 172,386 BOE, as compared to 72,965 BOE for the same period in 2004, an increase of 136%. Net production for the full year 2005 was 508,430 BOE, compared to 223,333 BOE in 2004, an increase of 127%. The company's average net daily production in December 2005 was approximately 2,050 BOE per day.
Proved reserves totaled approximately 30.2 million barrels of oil equivalents (BOE), a 42% increase over the 21.2 million BOE for the previous year. Future net revenues before income taxes, discounted at 10%, based on $55.00 per barrel of oil and $8.20 per Mcf of gas, were $682.9 million at year-end 2005. This compared to $302.4 million, using average prices of $39.00 per barrel of oil and $5.19 per Mcf of gas, for year-end 2004.
"2005 proved to be a tremendous year for us," said Tim Rochford, president and chief executive officer. "This truly was a year of growth through the internal development of our existing properties. We expect our own drilling rig to be in place and operational very soon. We currently have identified over 540 drilling locations on 50,000 acres and continue to look for acquisitions that either complement our existing properties or create new core areas."
Arena Resources Inc. is an oil and gas exploration, development and production company with current operations in Oklahoma, Texas, 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 Twelve Months Ended
Dec. 31, Dec. 31,
-------- --------
2005 2004 2005 2004
------ ------ ------ ------
Oil and Gas Revenues $9,362,003 $2,972,346 $25,843,077 $8,482,130
--------------------- -----------------------
Costs and Operating
Expenses
Oil and gas
production costs 1,447,671 691,082 3,832,486 1,975,835
Oil and gas
production taxes 709,295 225,435 1,939,739 629,703
Depreciation,
depletion and
amortization 1,230,713 458,563 2,781,504 1,011,602
Accretion expense 28,101 15,657 102,585 53,729
General and
administrative
expense 467,395 239,284 1,365,590 874,850
--------------------- -----------------------
Total Costs and
Operating
Expenses 3,883,175 1,630,021 10,021,904 4,545,719
--------------------- -----------------------
Other Income (Expense)
Gain from change in
fair value of put
options 8,536 65,346 95,033 68,251
Other financing
expense (597,773) - (597,773) -
Interest expense (40,083) (27,529) (229,624) (155,936)
--------------------- -----------------------
Net Other Income
(Expense) (629,320) 37,817 (732,364) (87,685)
--------------------- -----------------------
Income Before Provision
for Income Taxes 4,849,508 1,380,142 15,088,809 3,848,726
Provision for Deferred
Income Taxes (1,834,624) (515,045) (5,628,126)(1,397,074)
--------------------- -----------------------
Net Income $3,014,884 $865,097 $9,460,683 $2,451,652
--------------------- -----------------------
Basic Net Income Per
Common Share $0.23 $0.10 $0.85 $0.31
Diluted Net Income Per
Common Share $0.22 $0.09 $0.75 $0.28
Dec. 31,
2005 2004
----------- -----------
Basic Weighted-Average Common
Shares Outstanding 11,164,070 7,873,213
Diluted Weighted-Average Common
Shares Outstanding 12,600,106 8,694,178
COMPARATIVE OPERATING STATISTICS
Year Ended
Dec. 31,
-----------
2005 2004 Change
------- ------- ------
Net Production - BOE per day 1,393 612 +128%
Per BOE:
Average Sales Price $50.83 $37.98 +34%
Operating Costs 11.35 11.67 -3%
DD&A 5.47 4.53 +21%
General & Administrative Expenses 2.69 3.92 -31%
Interest Expense 0.45 0.70 -36%
ARENA RESOURCES INC.
CONSOLIDATED BALANCE SHEET
Dec. 31, Dec. 31,
2005 2004
------ ------
ASSETS
Current Assets
Cash $4,317,114 $1,253,969
Account receivable 3,180,749 1,149,513
Joint interest billing receivable 140,561 61,805
Prepaid expenses 35,436 33,136
------------ ------------
Total Current Assets 7,673,860 2,498,423
------------ ------------
Property and Equipment, Using Full cost
Accounting
Oil and gas properties subject to
amortization 69,770,685 34,457,137
Drilling advances - 900,000
Equipment 26,687 26,687
Deposits on drilling rig 1,191,126 -
Office equipment 106,177 60,401
------------ ------------
Total Property and Equipment 71,094,675 35,444,225
Less: Accumulated depreciation and
amortization (4,346,628) (1,565,124)
------------ ------------
Net Property and Equipment 66,748,047 33,879,101
------------ ------------
Total Assets $74,421,907 $36,377,524
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $6,038,691 $1,805,865
Income taxes payable 329,986 -
Accrued liabilities 221,519 34,800
------------ ------------
Total Current Liabilities 6,590,196 1,840,665
------------ ------------
Long-Term Liabilities
Notes payable - 10,000,000
Notes payable to related parties 400,000 400,000
Put option - 95,033
Asset retirement liability 1,515,347 1,267,993
Deferred income taxes 7,187,609 1,971,990
------------ ------------
Total Long-Term Liabilities 9,102,956 13,735,016
------------ ------------
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;
13,099,702 shares and 9,132,910 shares
outstanding, respectively 13,100 9,133
Additional paid-in capital 45,331,234 15,258,352
Options and warrants outstanding 1,483,807 3,213,159
Deferred compensation (115,545) (234,277)
Retained earnings 12,016,159 2,555,476
------------ ------------
Total Stockholders' Equity 58,728,755 20,801,843
------------ ------------
Total Liabilities and Stockholders' Equity $74,421,907 $36,377,524
------------ ------------
ARENA RESOURCES INC.
STATEMENTS OF CASH FLOW
Dec. 31, Dec. 31,
2005 2004
------ ------
Cash Flows From Operating Activities
Net income $9,460,683 $2,451,652
Adjustments to reconcile net income to
net cash
Provided by operating activities:
Warrants issued for financing
expense 597,773 -
Depreciation, depletion and
amortization 2,781,504 1,011,602
Provision for income taxes 5,628,126 1,397,074
Gain from change in fair value of
put option (95,033) (68,251)
Loss on sale of equipment - 5,586
Amortization of deferred
compensation 118,732 204,525
Accretion of discounted
liabilities 102,585 83,730
Changes in assets and liabilities:
Accounts and joint interest
receivable (2,109,992) (656,864)
Other changes in deferred income
tax (82,521) -
Prepaid expenses (2,300) (4,201)
Accounts payable and accrued
liabilities 4,419,545 1,570,831
------------ ------------
Net Cash Provided by Operating
Activities 20,819,102 5,995,684
------------ ------------
Cash Flows from Investing Activities
Proceeds from sale of property and
equipment 735,000 10,500
Cash payments on purchase of East Hobbs - (1,028,000)
Cash payments on purchase of Furhman-
Mascho properties - (711,802)
Purchase and development of oil and gas
properties (34,665,614) (4,802,141)
Maturity of long-term investment - 25,234
Deposits on drilling rig (1,191,126) -
Purchase of office equipment (45,776) (41,423)
------------ ------------
Net Cash Used in Investing Activities (35,167,516) (6,547,632)
------------ ------------
Cash Flows From Financing Activities
Proceeds from issuance of common stock
and warrants, net of offering costs 9,536,938 8,383,557
Proceeds from exercise of warrants, net
of offering costs 17,874,621 354,124
Issuance of notes payable - 2,000,000
Payment of notes payable (10,000,000) (10,008,440)
------------ ------------
Net Cash Provided by Financing
Activities 17,411,559 729,241
------------ ------------
Net Increase in Cash 3,063,145 177,293
Cash at Beginning of Period 1,253,969 1,076,676
------------ ------------
Cash at End of Period $4,317,114 $1,253,969
------------ ------------
RECONCILIATION OF CASH FLOW FROM OPERATIONS
Net cash provided by operating activities $20,819,102 $5,995,684
Change in operating assets and liabilities (2,224,732) (909,766)
------------ ------------
Cash flow from operations $18,594,370 $5,085,918
============ ============
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
Dec. 31, Dec. 31,
2005 2004
---------- ---------
NET INCOME $9,460,683 $2,451,652
Interest expense 229,624 155,936
Income tax expense 5,628,126 1,397,074
Depreciation, depletion and
amortization 2,781,504 1,011,602
Accretion of discounted liabilities 102,585 83,730
Gain from change in fair value of put
option (95,033) (68,251)
Loss on sale of equipment - 5,586
Other financing expense 597,773 -
Amortization of deferred compensation 118,732 204,525
------------ -----------
ADJUSTED EBITDA $18,823,994 $5,241,854
------------ -----------
Contact:
K M Financial Inc.
Bill Parsons, 480-947-1589
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Source: Arena Resources Inc.
