OilVoice - FX Energy Reports Second Quarter Results

FX Energy Reports Second Quarter Results

Monday, August 09, 2010

FX Energy, Inc. has announced a net loss of $(22.1) million, or $(0.51) per share, for the quarter ended June 30, 2010. Excluding a non-cash foreign currency exchange charge of $22.0 million, the Company would have recorded a second quarter nominal loss of $(0.1) million, or $(0.00) per share. The results represent a significant improvement over the net loss, adjusted for foreign exchange gains, of $(2.7) million, or $(0.06) per share reported in the second quarter of 2009.

Increased Production and Prices Drive Revenues Higher
Higher second quarter production was the largest contributor to the Company's improved second quarter results. Total net oil and gas production tripled to 1,009 million cubic feet equivalent (Mmcfe) during the second quarter of 2010, compared to 328 Mmcfe during the 2009 quarter. Total revenues more than doubled to $6.1 million during the second quarter of 2010 from $2.5 million during the same quarter of 2009. The production increase was due to natural gas production in Poland from the Company's Roszkow well, which began producing in September 2009.
Oil prices increased 33% over the year, averaging $67.12 per barrel in the second quarter of 2010, compared to $50.45 per barrel in the same quarter of 2009. Gas prices during the second quarter of 2010 averaged $4.91 per Mcf, compared to $4.44 per Mcf during the same quarter of 2009, an increase of 11%. Zloty denominated gas prices were slightly lower in the 2010 second quarter than in the same quarter of 2009, but the quarter-to-quarter stronger Polish zloty resulted in increased U.S. dollar prices.

Clay Newton, FX's Vice President Finance, remarked:
"It is unfortunate that the non-cash charges for intercompany foreign exchange accounting continue to mask our significant progress. Nevertheless, our cash operating results and oil and gas production for the first half set several new positive records for us. Excluding these non-cash charges, our earnings per share would have been a positive $0.04 compared to a loss of $(0.16) for last year's first half results. Our cash flow from operating activities rose a substantial $12.5 million. These very positive results are not just improving our operating statement, but our balance sheet as well. Our working capital jumped by 65% during the first half to $5.7 million, which enhances our ability to fund exploration."

Six Month Results
The Company reported a net loss of $(21.2) million, or $(0.49) per share, for the first six months of 2010. Excluding non-cash foreign currency exchange losses of $(23.0) million, the Company would have recorded net income for the first six months of 2010 of $1.8 million, or $0.04 per share, compared to a net loss, adjusted for foreign exchange losses, of $(6.6) million, or $(0.16) per share reported in the first six months of 2009.

Oil and gas revenues for the 2010 first six months were more than double those recorded during the same period of 2009. The Company recognized oil and gas revenues of $11.5 million for the first six months of 2010, compared to $3.6 million for the same period of 2009. Total revenues for the first six months of 2010 were $12.3 million, compared to $4.2 million in the first six months of 2009. Natural gas production in Poland was 1,838 Mmcf during the first six months of 2010, compared to 516 Mmcf during the same period of 2009.

Oil prices increased 61% over the year, averaging $67.59 per barrel in the first half of 2010, compared to $42.08 per barrel in the same period of 2009. Gas prices during the first half of 2010 averaged $5.15 per Mcf, compared to $4.38 per Mcf during the same period of 2009, an increase of 18%. Zloty denominated gas prices were slightly lower in the 2010 first half than in the same period of 2009, but the stronger Polish zloty resulted in increased U.S. dollar prices.

Cash Flow and EBITDAX Set First Half Records; Non-cash Charges Continue to Vary
Net cash provided from operating activities of $5.0 million during the 2010 first half increased $12.5 million from the $(7.5) million of cash used in operating activities during the first half of 2009. The Company also reported record first half 2010 earnings before interest, taxes, depreciation, amortization, exploration expense, and other non-cash charges (EBITDAX)(1). EBITDAX during the first half of 2010 was $6.4 million, compared to $(1.0) million in the first half of 2009. At June 30, 2010, the Company's cash and investments were $7.1 million, with working capital of $5.7 million.

The non-cash foreign exchange charges of $23.0 million and $6.7 million for the first half of 2010 and 2009, respectively, are included in other income and expense. The charges come primarily from recognition of gains and losses on intercompany loans from FX Energy, Inc., to FX Poland, its wholly-owned subsidiary. These are non-cash losses only, and could vary greatly depending upon future exchange rate fluctuations.