ReoStar Energy Corp. Announces Results for Fiscal Year 2009 FORT WORTH, TX--(Marketwire - 07/20/09) - ReoStar Energy Corp. (OTC.BB:REOS - News) today
announced results of operations for the Fiscal Year (FY) ended March 31,
2009. Highlights of the Fiscal Year 2009:
-- Secured a $25MM senior secured credit facility in October 2008
-- Twelve Months Oil and gas revenues increased 33% to $6.5 million
versus $4.9 million for the previous year ended March 31, 2008
-- Twelve Months oil and gas production increased 35% to 124,968 BOE
versus 92,193 BOE for the same period in the prior year
Mark Zouvas, CEO of ReoStar, stated, "We are pleased to have achieved improvements in our oil and gas production over the previous year, despite the challenging energy environment we faced. The industry continues to undergo extraordinary changes as pricing volatility has created a large number of insolvencies during the last six months. Due to weak pricing, we have shifted our focus from development drilling to improving operational efficiencies and cost control by utilizing advanced technologies at down-market costs to improve current production. Additionally, we are reviewing distressed E&P opportunities for acquisition. Our Union Bank of California credit facility has allowed us to withstand the continued volatility in pricing and we expect to be in position to seize growth opportunities that have historically followed industry wide slowdowns." Fiscal Year 2009 Results Summary Oil and gas production for the year increased 35% to a total of 124,968 BOE compared with 92,193 BOE for the fiscal year ended March 31, 2008. Oil and gas revenue for the year increased 33% to a total of $6.5 million compared to $4.9 million for the fiscal year ended March 31, 2008. The Company had a net loss of $2.0 million for the fiscal year compared to net income of $796,000 for the prior fiscal year. The fiscal year 2009 net loss included non-cash net expenses totaling $4.4 million. During fiscal year ended March 31, 2009, the Company's cash provided from operations was $825,000 and REOS invested $10 million in capital expenditures. Financing activities provided net cash of $9.0 million. The Company entered into a $25 million senior secured credit facility with an initial borrowing base of $14 million. The Company borrowed $9.8 million against the borrowing base during the fiscal year ended March 31, 2009. On March 31, 2009, REOS had $426,000 in cash and total assets of $23.0 million. Debt consisted of payables to non-related parties of $9.1 million, of which $9.0 million were long-term note payables. REOS also had accounts and notes payables to related parties of $3.6 million. Fiscal Year 2009 Operations Summary
-- Barnett Shale. ReoStar's main area of interest in the Barnett Shale
play is located in the "oil window" of the Barnett in southwest Cooke
County, Texas.
-- The Company completed, and began production in the seven wells that
were in process as of March 31, 2008. REOS also drilled, completed,
and began production in six wells. Two other wells were drilled
that are expected to be completed in the second quarter of fiscal
year 2010.
-- Corsicana Enhanced Oil Recovery (EOR) Project. ReoStar began injecting
surfactant polymer in phase I of the project in mid-June 2007 and has
continued injection throughout the current fiscal year. REOS initiated
phase II of the project by drilling 12 wells in June 2008 in an area
immediately south of the injection facility adjacent to the phase I
wells.
-- Corsicana deeper zone exploration. ReoStar drilled four deeper
exploratory wells in the Corsicana acreage. The first two, a Glen Rose
well and a Pecan Gap well were unsuccessful. In December 2008, the
company successfully completed two Pecan Gap wells.
Fiscal Year End 2009 Proven Reserves At year-end 2009, the independent petroleum-consulting firm of Forrest Garb and Associates, Inc. reviewed ReoStar's reserves. These engineers reviewed 100% of the Company's proved reserves. All estimates of oil and gas reserves are subject to uncertainty. The following table sets forth the estimated proven reserves in barrel of oil equivalents and the benchmark prices used in projecting them (in thousands except prices):
Estimated Proved Reserves Corsicana E. Texas
Barnett Shale Field Field Total
------------- --------- -------- ------
Proved Developed (MBOE) 688 187 13 888
Proved Undeveloped (MBOE) 2,072 10,320 - 12,392
------------- --------- -------- ------
Total Proven Reserves at
March 31, 2009 2,760 10,507 13 13,280
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Benchmark Pricing
Natural Gas per mmbtu $ 3.58
Crude Oil per barrel $ 49.65
Plans for fiscal year 2010 Barnett Shale In December 2008, ReoStar suspended its Barnett Shale development due to the decline in commodity prices. The Company expects to renew development once commodity prices have stabilized. The Company has two drilling commitments and expects to drill one cluster of six wells in order to fulfill those commitments in fiscal 2010, contingent on some recovery in gas pricing. However, regardless of commodity volatility, the Company will fulfill their drilling commitments by year-end. The capital expenditure budget assumes REOS will retain 100% working interests in the wells. The Company expects to fund the drilling with the proceeds of a debt facility and if appropriate, proceeds from the sale of working interests in the referenced wells, which will reduce its interests accordingly. Corsicana ReoStar has applied for an area wide injection permit, which when granted will allow the Company to streamline the regulatory permitting process. Upon approval, REOS expects to begin injection in Phase II of the polymer flood. REOS expects to begin drilling Phase III of the surfactant-polymer project in the fourth quarter of the current fiscal year 2010. REOS will drill three more Pecan Gap wells in July and August of 2009. If the wells are successful, the company expects to initiate a Pecan Gap drilling program and will drill up to 5 wells per month for the balance of the fiscal year. The Pecan Gap lies at about 1,800 feet and has proven to show favorable economics. REOS will, at its discretion, sell up to 50% working interest in these wells on a turn-key contract basis. As is our policy, we the Company will refrain from granting more than one offset well to third-party working interest owners, which enables us to have 100% working interest in subsequent wells drilled. Total capital expenditure budget for fiscal 2010 for the Corsicana projects is $3.5 million. The budget will be funded primarily with proceeds from the sale of up to 50% working interest in the Pecan Gap wells, the credit facility, and cash flow from current operations. South Texas During the first quarter of the fiscal year, REOS signed a contract to acquire a 100% working interest (75% net revenue interest) in 13,000 acres in South Texas. The acreage is in the Edwards trend and contains both Edwards and Eagle Ford Shale prospects. The technical team will remain in place once the transaction is complete as they have significant experience in South Texas and will be the operator of record for this area of ReoStar's development. The team will provide the technical expertise required to be successful in the Edwards and Eagle Ford Shale plays. "Our position for 2010 is very good as we have remained prudent in managing our budgets and adjusting to the current economic conditions. We have avoided entering into long-term contracts with respect to our drilling operations and therefore have been able to survive the dramatic downturn and avoid the problems now being experienced by some of our industry peers. We have significant infrastructure in place in our core areas, yet our fixed operating costs are below industry averages. We continue to seek valuable bolt-on acreage in our perspective target areas, but will remain conservative with capital expenditures until we feel it is appropriate to deploy our resources. We have a solid number of high quality prospects in the Barnett Shale to drill and our expansion in Corsicana is showing tremendous promise, especially with our Pecan Gap drilling program. Our new opportunity in Eagle Ford Shale could prove to be prescient for ReoStar, as we believe it will provide significant gas and liquid production in anticipation of rising gas prices. We are very excited by the prospects of our company and we feel well positioned to capitalize on the opportunities presented in this environment,'' concluded Mr. Zouvas. About ReoStar Energy Corporation ReoStar Energy Corporation (OTC.BB:REOS - News), headquartered in Fort Worth, Texas, is an oil and gas company engaged in the acquisition, development and production of natural gas and oil properties with operations primarily focused on developmental resource plays and enhanced oil recovery projects. The Company has vertically integrated its assets to remove potential obstacles to growth, which will enable it to develop and produce assets without the risk, cost and time involved in traditional exploration. The Company's strategy is to acquire an attractive portfolio of oil reserves for a low cost, which have a high ratio of possible, probable or proven undeveloped reserves. By converting these undeveloped reserves into proved producing reserves, the Company will continue to realize an increase in the overall value at low risk and cost. The Company's assets include approximately 20,000 gross (16,250 net) acres of mineral leasehold located in Texas (Barnett & Corsicana) and Arkansas (Fayetteville). ReoStar's assemblage of E&P assets allows for appreciable, unimpeded growth into the foreseeable future. Additional information is located on the company's website: www.reostarenergy.com. Certain statements in this news release may contain forward-looking information within the meaning of Rule 175 under the Securities Act of 1933 and Rule 3b-6 under the Securities Exchange Act of 1934, and are subject to the safe harbor created by those rules. All statements, other than statements of fact, included in this release, including, without limitation, statements regarding potential future plans and objectives of the company, are forward-looking statements that involve risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Technical complications which may arise could prevent the prompt implementation of any strategically significant plan(s) outlined above.
ReoStar Energy Corporation
Consolidated Statements of Operations
Years Ended
---------------------------------
Mar. 31, 2009 Mar. 31, 2008
------------- -------------
Revenues
Oil & Gas Sales $ 6,558,069 $ 4,902,072
Sale of Leases 18,005 307,028
Other Income 458,365 281,231
------------- -------------
7,034,439 5,490,331
------------- -------------
Costs and Expenses
Oil & Gas Lease Operating Expenses 2,598,208 2,125,261
Workover Expenses 114,683 356,342
Severance & Ad Valorem Taxes 427,307 318,785
Geologic & Geophysical - 8,993
Delay Rentals 2,975 52,186
Plugging Costs & Expired Leases 433,976 290,959
Depletion & Depreciation 3,487,440 1,520,406
General & Administrative:
Salaries & Benefits 874,418 1,104,785
Legal & Professional 720,771 584,765
Other General & Administrative 701,687 332,009
Interest, net of capitalized interest
of $537,024 and $488,299 for the
years ended March 31, 2009 and
March 31, 2008, respectively 3,780 -
------------- -------------
9,365,245 6,694,491
------------- -------------
Other Income (Expense)
Interest Income 79,876 210,938
Other Expense (6,745) (16,938)
Loss on Equity Method Investments (206,561) (32,605)
------------- -------------
(Loss) from continuing operations
before income taxes and
discontinued operations (2,464,236) (1,042,765)
------------- -------------
Income Tax Benefit 460,402 364,930
------------- -------------
Loss before discontinued operations (2,003,834) (677,835)
Income from discontinued operations,
net of income taxes:
Pipeline Income - 22,930
Gain on Sale of Pipeline - 1,450,805
------------- -------------
Income from discontinued operations - 1,473,735
------------- -------------
Net Income (Loss) $ (2,003,834) $ 795,900
============= =============
Basic & Diluted (Loss) Income per
Common Share:
Loss from continuing operations $ (0.02) $ (0.01)
Income from discontinued
operations $ - $ 0.02
------------ -------------
Net Income (Loss) per Common
Share $ (0.02) $ 0.01
============ =============
Weighted Average Common
Shares Outstanding 80,300,804 78,800,618
============ =============
Contact:
Source: ReoStar Energy Corporation
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