Saratoga Resources, Inc. Reports Financial and Operational Results for the 2011 First Quarter
Saratoga Resources, Inc. (OTCQB:SROE) today announced financial and
operational results for the quarter ended March 31, 2011.
Key Financial Results
Net income of $0.4 million, or $0.02 per share, for first quarter 2011
compared to a net loss of $(5.8) million, or $(0.35) per share, in the
first quarter 2010;
EBITDA of $9.2 million for first quarter 2011 compared to $5.7 million
in the first quarter 2010;
Average hydrocarbon prices realized of $76.86 per barrel of oil
equivalent ('BOE?) for first quarter 2011 compared to $62.04 per BOE
in the first quarter 2010;
Oil and gas production of 205,546 BOE (67.5% oil) in first quarter
2011 compared to 197,541 BOE (63.8% oil) in the first quarter 2010; and
Oil and gas revenues of $15.8 million for first quarter 2011 compared
to $12.3 million in the first quarter 2010.
EBITDA is a non-GAAP financial measure and is defined and reconciled to
the most directly comparable GAAP measure under 'Non-GAAP Financial
Measures? below.
The increase in oil and gas revenues reflects higher crude oil prices
during the 2011 quarter and increased oil production. Net income, in
addition to benefiting from the 28.9% increase in oil and gas revenues,
benefited from refunds of severance taxes totaling $0.4 million during
the 2011 quarter, a $1.2 million decrease in bankruptcy related costs
and a $2.3 million decrease in interest expense. Results for the 2010
period reflect Saratoga′s operations in bankruptcy from March 31, 2009
to May 14, 2010 when Saratoga exited bankruptcy.
Financial Position
Cash balance at May 4, 2011 of approximately $20 million;
$6.2 million of cash on hand at March 31, 2011, up from $4.4 million
at December 31, 2010;
$6.0 million of working capital at March 31, 2011, up from $2.6
million at December 31, 2010;
$7.4 million of cash received in April 2011 from placement of common
stock and warrants;
$1.3 million of net cash received in April 2011 from severance tax
refunds and $1.3 million of cash received in April 2011 from an
insurance settlement;
$1.0 million (principal and interest) of non-recurring pre-bankruptcy
obligations repaid during quarter, reducing the unpaid principal,
interest and penalty balance to $1.9 million at March 31, 2011; and
Pro forma shareholders equity of $4.0 million at March 31, 2011
(giving effect to the April 2011 placement of common stock and
warrants) as compared to a deficit in shareholders′ equity of $4.1
million at December 31, 2010.
The increase in profitability, and resulting operating cash flows,
together with the April 2011 private placement of $7.4 million and
receipt of funds from an insurance settlement and severance tax refund,
has resulted in the company′s cash position improving from $4.4 million
at year-end to $6.2 million at March 31, 2011 and to approximately $20
million by May 4, 2011.
Since exit from bankruptcy in May 2010, $20.6 million of cash has been
used to pay uncontested claims and principal on credit facilities,
including $1.0 million of principal and interest paid during the first
quarter of 2011. Claims remaining to be paid under the plan of
reorganization, excluding amounts owed under credit facilities, totaled
$1.9 million (includes $0.4 million in penalties) at March 31, 2011, of
which $1.1 million (principal and interest) is payable in the 2011
second quarter.
Upon final settlement of the claims described above, our only debt
remaining unpaid dating to our 2009 bankruptcy, other than loans from
officers, are amounts owing under our credit facilities, totaling $135.3
million (excluding $10.2 million of letters of credit), which mature in
April 2012. Quarterly interest payments under our credit facilities
total approximately $3.9 million.
During the quarter, and since exit from bankruptcy, operating cash flow
has covered all ongoing debt service obligations as well as funding a
curtailed CAPEX budget. Going forward, our cash on hand and operating
cash flow are expected to cover our debt service obligations and to fund
an increased CAPEX budget over the balance of 2011 and for the
foreseeable future.
Development of our deep shelf exploratory prospects and retirement of
our credit facilities in April 2012 are each expected to require us to
secure capital beyond that on hand or provided by operations. We
continue to be actively engaged in discussions with potential financing
sources and partners regarding both our deep shelf financing plans and
establishment of new credit facilities.
Development Highlights and Plans
With the growth in our cash position from improved operating cash flow
and our April 2011 private placement, insurance settlement and severance
tax refund, we have increased our CAPEX budget over the next 12 months
to $57 million and have contracted 2 workover rigs which are currently
in operation at Breton Sound 32 and Grand Bay fields and are negotiating
to contract a drilling rig to commence drilling of a proved undeveloped
Catina prospect in Breton Sound Block 51. We have just completed 2
successful recompletions at Main Pass 25 Field. With our improved cash
position and increased CAPEX budget, we intend to accelerate the pace of
workovers performed and development drilling on prospects selected by
our management team based on a risk-reward analysis. We are prioritizing
prospects considered to have the lowest risks while offering potential
for high and rapid returns. Our immediate focus is to return production
levels to tested potential from an inventory of shut-in wells and wells
producing below capacity.
Management Comments
Thomas Cooke, Chairman and CEO, commented, 'Because of the sharp
increase in our cash holdings, arising from our strong operating cash
flows and receipt of funds from our recent equity placement, for the
first time in our history we now enjoy operational flexibility to pursue
our development program without cash conservation concerns. As a result,
we have increased our CAPEX budget for the next 12 months and plan to
accelerate investments in our development plan while maintaining prudent
levels of cash reserves. With our increased cash level and a large
inventory of proved developed non-producing opportunities, deferred
maintenance projects and other lower risk opportunities, we expect to be
able to bring on line substantial additional production in a relatively
short time frame and without substantial drilling risks.?
Mr. Cooke added 'In addition to gaining operational flexibility and
facilitating increased investments in our development plan, our increase
in equity, together with the recent growth in our market capitalization,
has positioned Saratoga to move forward with a potential listing on a
national stock exchange. We intend to apply for such a listing as soon
as possible.?
About Saratoga Resources
Saratoga is an independent exploration and production company with
offices in Houston, Texas and Covington, Louisiana. Principal holdings
cover 33,869 gross (31,125 net) acres, mostly held-by-production,
located in the transitional coastline and protected in-bay environment
on parish and state leases of south Louisiana. Saratoga's stock
currently trades on the OTC Market under the symbol 'SROE.PK'.
Forward-looking Statements
This press release includes certain estimates and other forward-looking
statements within the meaning of Section 21E of the Securities Exchange
Act of 1934, including statements regarding future ability to fund the
company′s development program and grow reserves, production, revenues
and profitability and the ultimate outcome of such efforts, and the
timing and ultimate approval of any exchange listing application. Words
such as 'expects?, 'anticipates', 'intends', 'plans', 'believes',
'assumes', 'seeks', 'estimates', 'should', and variations of these words
and similar expressions, are intended to identify these forward-looking
statements. While we believe these statements are accurate,
forward-looking statements are inherently uncertain and we cannot assure
you that these expectations will occur and our actual results may be
significantly different. These statements by the Company and its
management are based on estimates, projections, beliefs and assumptions
of management and are not guarantees of future performance. Important
factors that could cause actual results to differ from those in the
forward-looking statements include the factors described in the 'Risk
Factors' section of the Company's filings with the Securities and
Exchange Commission. The Company disclaims any obligation to update or
revise any forward-looking statement based on the occurrence of future
events, the receipt of new information, or otherwise.
| SARATOGA RESOURCES, INC. CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) | ||||||||
For the Three Months | ||||||||
| 2011 | 2010 | |||||||
Revenues: | ||||||||
Oil and gas revenues | $ | 15,798,288 | $ | 12,255,776 | ||||
Other revenues | 1,148,750 | 435,258 | ||||||
Total revenues | 16,947,038 | 12,691,034 | ||||||
Operating Expense: | ||||||||
Lease operating expense | 4,086,155 | 3,661,025 | ||||||
Workover expense | 557,731 | 884,523 | ||||||
Exploration expense | 254,366 | 188,895 | ||||||
Depreciation, depletion and amortization | 3,174,770 | 3,178,939 | ||||||
Accretion expense | 424,422 | 425,212 | ||||||
General and administrative | 1,962,984 | 1,348,821 | ||||||
Production and severance taxes | 1,432,541 | 1,346,306 | ||||||
Total operating expenses | 11,892,969 | 11,033,721 | ||||||
Operating income | 5,054,069 | 1,657,313 | ||||||
Other income (expense): | ||||||||
Commodity derivative income, net | - | 696,550 | ||||||
Interest income | 27,566 | 6,939 | ||||||
Interest expense | (4,580,886 | ) | (6,869,942 | ) | ||||
Total other expense | (4,553,320 | ) | (6,166,453 | ) | ||||
Net income (loss) before reorganization expense and income taxes | 500,749 | (4,509,140 | ) | |||||
Reorganization expense | 110,012 | 1,324,694 | ||||||
Net income (loss) before income taxes | 390,737 | (5,833,834 | ) | |||||
Income tax provision | 32,500 | - | ||||||
Net income (loss) | $ | 358,237 | $ | (5,833,834 | ) | |||
Net income (loss) per share: | ||||||||
Basic | $ | 0.02 | $ | (0.35 | ) | |||
Diluted | $ | 0.02 | $ | (0.35 | ) | |||
Weighted average number of common shares outstanding: | ||||||||
Basic | 17,322,487 | 16,690,292 | ||||||
Diluted | 20,132,758 | 16,690,292 | ||||||
| SARATOGA RESOURCES, INC. CONSOLIDATED BALANCE SHEETS (Unaudited) | ||||||||
| March 31, | December 31, | |||||||
| 2011 | 2010 | |||||||
| ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 6,156,145 | $ | 4,409,984 | ||||
Accounts receivable | 10,261,954 | 9,039,836 | ||||||
Prepaid expenses and other | 454,751 | 888,717 | ||||||
Other current asset | 300,000 | 300,000 | ||||||
Total current assets | 17,172,850 | 14,638,537 | ||||||
Property and equipment: | ||||||||
Oil and gas properties - proved (successful efforts method) | 171,603,638 | 170,870,775 | ||||||
Other | 588,318 | 561,572 | ||||||
172,191,956 | 171,432,347 | |||||||
Less: Accumulated depreciation, depletion and amortization | (40,772,750 | ) | (37,597,980 | ) | ||||
Total property and equipment, net | 131,419,206 | 133,834,367 | ||||||
Other assets, net | 3,008,739 | 2,870,379 | ||||||
Total assets | $ | 151,600,795 | $ | 151,343,283 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 3,172,484 | $ | 4,655,874 | ||||
Revenue and severance tax payable | 5,184,513 | 5,071,508 | ||||||
Accrued liabilities | 2,350,276 | 1,649,994 | ||||||
Short-term notes payable | 77,711 | 285,298 | ||||||
Asset retirement obligation ? current | 344,743 | 332,863 | ||||||
Total current liabilities | 11,129,727 | 11,995,537 | ||||||
Long-term liabilities: | ||||||||
Asset retirement obligation | 11,410,513 | 11,653,212 | ||||||
Long-term debt, net of unamortized discount of $3,432,562 and $4,140,662, respectively | 131,908,309 | 131,200,209 | ||||||
Long-term debt ? related parties | 605,428 | 605,428 | ||||||
Total long-term liabilities | 143,924,250 | 143,458,849 | ||||||
Commitment and contingencies (see notes) | ||||||||
Stockholders' equity (deficit): | ||||||||
Common stock, $0.001 par value; 100,000,000 shares authorized 17,323,598 and 17,298,598 shares issued and outstanding at March 31, 2011 and December 31, 2010, respectively | 17,323 | 17,298 | ||||||
Additional paid-in capital | 27,846,910 | 27,547,251 | ||||||
Retained deficit | (31,317,415 | ) | (31,675,652 | ) | ||||
Total stockholders' deficit | (3,453,182 | ) | (4,111,103 | ) | ||||
Total liabilities and stockholders' equity (deficit) | $ | 151,600,795 | $ | 151,343,283 | ||||
| SARATOGA RESOURCES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) | ||||||||
For the Three Months | ||||||||
| 2011 | 2010 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | 358,237 | $ | (5,833,834 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation, depletion and amortization | 3,174,770 | 3,178,939 | ||||||
Accretion expense | 424,422 | 425,212 | ||||||
Amortization of debt issuance costs | 63,192 | 237,537 | ||||||
Amortization of debt discount | 708,100 | 169,104 | ||||||
Commodity derivative income | - | (473,962 | ) | |||||
Stock-based compensation | 290,684 | 30,600 | ||||||
Abandonment costs | (655,240 | ) | - | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (1,222,118 | ) | 315,150 | |||||
Prepaids and other | 433,966 | 609,983 | ||||||
Accounts payable | (1,533,216 | ) | (123,645 | ) | ||||
Revenue and severance tax payable | 113,005 | (88,949 | ) | |||||
Accrued liabilities | 376,581 | 6,544,236 | ||||||
Net cash provided by operating activities | 2,532,383 | 4,990,371 | ||||||
Cash flows from investing activities: | ||||||||
Additions to oil and gas property | (359,334 | ) | (3,310,169 | ) | ||||
Additions to other property and equipment | (26,746 | ) | - | |||||
Other | (201,554 | ) | (121,150 | ) | ||||
Net cash used in investing activities | (587,634 | ) | (3,431,319 | ) | ||||
Cash flows from financing activities: | ||||||||
Issuance of common stock | 9,000 | - | ||||||
Repayment of short-term notes payable | (307,502 | ) | (414,256 | ) | ||||
Proceeds from debt borrowings | 99,914 | - | ||||||
Settlements of commodity hedges recorded in purchase accounting | - | 38,913 | ||||||
Net cash used in financing activities | (198,588 | ) | (375,343 | ) | ||||
Net increase in cash and cash equivalents | 1,746,161 | 1,183,709 | ||||||
Cash and cash equivalents - beginning of period | 4,409,984 | 21,575,483 | ||||||
Cash and cash equivalents - end of period | $ | 6,156,145 | $ | 22,759,192 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid for interest | $ | 3,915,130 | $ | - | ||||
Cash paid for income taxes | $ | - | $ | - | ||||
Non-GAAP Financial Measures
EBITDA is a non-GAAP financial measure.
The company defines EBITDA as net income (loss) before income tax
expense (benefit), interest expense and depreciation, depletion and
amortization excluding interest income, realized gains on out-of-period
derivative contract settlements, (gain) loss on the sale of assets,
acquisition costs, settlements for prior claims, other various non-cash
items (including asset impairments, income from equity investments,
noncontrolling interest, stock-based compensation, unrealized (gain)
loss on derivative contracts and provision for doubtful accounts), and
costs associated with the company′s bankruptcy.
EBITDA is a supplemental financial measure used by the company′s
management and by securities analysts, investors, lenders, rating
agencies and others who follow the industry as an indicator of the
company′s ability to internally fund exploration and development
activities and to service or incur additional debt. The company also
uses this measure because EBITDA allows the company to compare its
operating performance and return on capital with those of other
companies without regard to financing methods and capital structure.
EBITDA should not be considered as a substitute for net income,
operating income, cash flows from operating activities or any other
measure of financial performance or liquidity presented in accordance
with generally accepted accounting principles ('GAAP?). EBITDA excludes
some, but not all, items that affect net income and operating income and
these measures may vary among other companies. Therefore, the company′s
EBITDA may not be comparable to similarly titled measures used by other
companies.
The table below reconciles the most directly comparable GAAP financial
measures to EBITDA.
Reconciliation of Net Income (Loss) to EBITDA | |||||||||
Three Months Ended
| |||||||||
2011 | 2010 | ||||||||
Net income (loss) as reported | $ | 358,237 | $ | (5,833,834 | ) | ||||
Depreciation, depletion and amortization | 3,174,770 | 3,178,939 | |||||||
Income tax expense | 32,500 | -- | |||||||
Exploration expense | 254,366 | 188,895 | |||||||
Accretion expense | 424,422 | 425,212 | |||||||
Share-based compensation | 290,684 | 30,600 | |||||||
Interest expense, net | 4,553,320 | 6,863,033 | |||||||
Unrealized hedging gain | -- | (435,049 | ) | ||||||
Reorganization costs | 110,012 | 1,324,694 | |||||||
EBITDA | $ | 9,198,311 | $ | 5,742,460 | |||||
Saratoga Resources, Inc.
Thomas Cooke, CEO, 713-458-1560
or
Andrew
Clifford, President, 713-458-1560
Website: www.saratogaresources.net
