- 188% Increase in Revenue for the Three Months to Record $62.15 Million
- 214% Increase in Earnings for the Three Months to Record $24.79 Million
Arena Resources, Inc. has announced financial results for the three months and six months ended June 30, 2008. For the three month period ended June 30, 2008, Arena had oil and gas revenues of $62,159,281, compared to $21,620,299 for the quarter ended June 30, 2007, a 188% increase and net income of $24,794,349, or $0.67 per fully diluted share, compared to net income of $7,899,378, or $0.24 per fully diluted share, for the same period in 2007, a 214% increase. For the six month period ended June 30, 2008, the Company reported oil and gas revenues of $107,471,673, compared to oil and gas revenues of $38,271,600 for the six month period ended June 30, 2007, a 181% increase. Net income for the six month period ended June 30, 2008 was $43,112,744, or $1.18 per fully diluted share, compared to net income of $13,607,268, or $0.43 per fully diluted share, for the same period in 2007, a 217% increase.
The revenue increase was due to increases in production volumes, primarily due to development activity, and increases in commodity prices. Arena’s total sales production for the quarter ended June 30, 2008 was 558,484 BOEs (Barrel of Oil Equivalents). This represents a 45% increase over the same three month period in 2007 and an 8% increase over the first quarter of 2008. For the three months ended June 30, 2008, oil sales volume increased to 477,430 barrels, compared to 327,290 barrels for the same period in 2007, a 46% increase, and gas sales volume increased to 486,327 MCF (thousand cubic feet), compared to 348,169 MCF for the same period in 2007, a 40% increase. For the six months ended June 30, 2008, oil sales volume increased to 930,486 barrels, compared to 609,828 barrels for the same period in 2007, a 53% increase, and gas sales volume increased to 870,241 MCF, compared to 673,104 MCF for the same period in 2007, a 29% increase. The average commodity prices received by Arena were $119.23 per barrel of oil and $10.77 per MCF of natural gas for the quarter ended June 30, 2008, compared to $57.29 per barrel of oil and $8.24 per MCF of natural gas for the quarter ended June 30, 2007. The average prices received for the six months ended June 30, 2008 were $106.02 per barrel of oil and $10.14 per MCF of natural gas, compared to $54.70 per barrel of oil and $7.30 per MCF of natural gas for the six month period ended June 30, 2007.
Lease operating expenses for the three months ended June 30, 2008 were $7.66 per barrel of oil equivalent (“BOE”), a 13% increase from the prior year. Production taxes increased 69% to $5.34 per BOE. Depreciation, depletion and amortization costs increased 97% to $13.56 per BOE. General and administrative costs, which included a $1,488,905 charge for stock based compensation, were $6.54 per BOE, a 40% increase. General and administrative costs in the quarter also included such non-recurring costs as financial and reserve audit fees and $500,000 for franchise taxes. Net interest expense was $281,671 or $0.50 per BOE, a 74% decrease. For the six months ended June 30, 2008, lease operating expenses were $6.69 per BOE, a 3% decrease. Production taxes were $4.94 per BOE, a 64% increase. Depreciation, depletion and amortization costs were $12.75 per BOE, a 73% increase, and general and administrative costs, which included a $3,249,717 charge for stock based compensation, were $5.84 per BOE, a 39% increase. Net interest expense was $0.80 per BOE, a 47% decrease.
There was no outstanding debt on the Company’s $150 million bank credit facility at June 30, 2008. Commencing August 1, 2008, the Company put in place a “costless collar” on 518,000 barrels of oil with a $100.00 floor and $197.00 ceiling expiring December 31, 2009.
Net cash flow from operations for the three and six months ended June 30, 2008 was $48,493,997, or $1.31 per fully diluted share, and $85,539,984, or $2.33 per fully diluted share, compared to net cash flow of $16,146,388, or $0.50, and $28,525,618, or $0.90 per fully diluted share for the same periods in 2007 (1). This represents increases of 162% and 159% respectively.
Arena’s Chief Executive Officer, Mr. Phil Terry, stated, “We drilled 52 new development wells and re-fraced twelve more existing wells on our Fuhrman Mascho properties. We now have four drilling rigs operating at the Fuhrman Mascho and are drilling our 386th new well since April 2005. In June we completed an equity offering which has allowed us to eliminate our long-term debt, bring in the fourth drilling rig at the Fuhrman Mascho, close a $10.2 million acquisition in Lea County, New Mexico and increase our 2008 capital expenditure budget to $248 million. For the first six months, operations, excluding any acquisitions, were cash flow positive. With the increased budget, we don’t anticipate that to continue in the second half of 2008 as we accelerate the development of all our assets, having as many as eight to ten drilling rigs operating and drilling approximately 200 new wells company-wide. We continue to pressure-check existing, abandoned well bores in preparation of the arrival of the new Yates gas pipeline, which is expected in the second quarter of 2009. Right-of-ways are being secured and pipe has been ordered. We continue to look at acquisition opportunities, concentrating on those that complement our existing properties.”
Non-GAAP Financial Measures:
Earnings for the three months and six months ended June 30, 2008 include non-cash charges for stock based compensation of $1,488,905 and $3,249,717, respectively. Excluding such items, the Company’s earnings would have been $0.71 per diluted share for the three months ended June 30, 2008, and $1.26 for the six months ended June 30, 2008. The Company believes results excluding these items are more comparable to estimates provided by security analysts and, therefore, are useful in evaluating operational trends of the Company and its performance, compared to other similarly situated oil and gas producing companies.
(1) Cash Flow from Operations is a non-GAAP financial measure that represents "Net Cash Provided By Operating Activities" adjusted for the change in operating assets and liabilities. See below for a reconciliation of the related amounts.
