Saratoga Resources, Inc. Reports Result of Operations and Second Quarter 2012 Financials

Saratoga Resources, Inc. (NYSE MKT: SARA; the 'Company? or 'Saratoga?)
today announced financial and operating results for the quarter ended
June 30, 2012.

Key Financial Results

• 
  Oil and gas revenues of $23.8 million for the second quarter 2012
  compared to $18.8 million for the second quarter 2011;
  
• 
  Lease operating expenses ('LOE?) of $4.7 million ($14.49 per BOE) for
  second quarter 2012 compared to $4.1 million ($19.06 per BOE) for
  second quarter 2011;
  
• 
  General and administrative expenses ('G&A?) of $2.3 million ($7.22 per
  BOE) for second quarter 2012 compared to $1.9 million ($8.93 per BOE)
  for second quarter 2011;
  
• 
  Net income of $0.9 million, or $0.03 per fully diluted share, for
  second quarter 2012 compared to net income of $2.8 million, or $0.12
  per fully diluted share, for the second quarter 2011;
  
• 
  EBITDAX of $13.4 million ($41.71 per BOE) for the second quarter 2012
  compared to $13.3 million ($61.29 per BOE) for the second quarter
  2011; and
  
• 
  Discretionary cash flow of $9.4 million, or $0.32 per fully diluted
  share, for the second quarter 2012 compared to discretionary cash flow
  of $9.4 million, or $0.42 per fully diluted share, for the second
  quarter 2011.
  

Discretionary cash flow and EBITDAX are non-GAAP financial measures and
are defined and reconciled to the most directly comparable GAAP measure
under 'Non-GAAP Financial Measures? below.

The 27% increase in revenues for the second quarter 2012 reflects
increased production volumes (up 48% compared to the second quarter
2011) offsetting decreased prices realized from oil and gas sales (down
2.3% and 44.0% respectively).

While LOE increased by 13% over the corresponding quarter in 2011, this
reflects increased production for the second quarter and there was a 24%
decrease on a per BOE basis. Similarly, G&A increased by 20% over the
corresponding quarter in 2011 but was 19% lower on a per BOE basis.

While net income was much lower during the 2012 second quarter relative
to the corresponding quarter in 2011, the 2012 quarter reflected
substantially increased workover activity and expense (up $1.4 million)
and completion of plugging and abandonment operations commenced in the
first quarter on orphaned wells ($0.9 million) while the 2011 quarter
reflected lower severance taxes and income tax expense (in the aggregate
$1.5 million less than the 2012 quarter) relating to certain Louisiana
severance tax credits and utilization of net operating losses.

Operational Highlights

Operational highlights for second quarter 2012 included:

• 
  Began development drilling operations on the Mesa Verde SL 3763 #14
  well in Vermilion 16 Field;
  
• 
  9 recompletions, including 1 SWD recompletion;
  
• 
  15 workovers completed, including maintenance for SWD wells;
  
• 
  15 new pool discoveries;
  
• 
  102 gross (101 net) wells in production at June 30, 2012; and
  
• 
  32,185 gross (32,185 net) acres in 12 fields under lease at June 30,
  2012.
  

During the second quarter 2012, Saratoga commenced its develop drilling
program, spudding the Mesa Verde well and preparing to spud the Jupiter
and North Tiger wells. Saratoga also invested $13.4 million in 9
recompletions, 5 of which were successful, 2 of which were unsuccessful
and 2 of which were still in progress at the end of the quarter, and an
additional $3.5 million on 15 workovers, 13 of which were successful and
2 of which were unsuccessful. One of the recompletions and four of the
workovers involved operations on wells for salt water disposal.

The Mesa Verde SL 3763 #14 well in Vermilion 16 field was spud on May
14, 2012 and reached a total depth of 16,250 feet MD/TVD on July 23,
2012. The well encountered up to 15 potentially productive intervals,
including the Marg A, LF, Rob 54 and Amph B sands between 11,333 and
15,890 feet. The Marg A sequence was encountered structurally higher
than expected with much thinner MA-2, MA-3 and MA-4 sands compared to
downdip well control to the northeast. We will be evaluating a possible
future sidetrack of the Mesa Verde well targeting thicker sand
development to the north of the existing well bore. Meanwhile, we have
run a production liner in anticipation of testing and completing the
well.

In July 2012, the Jupiter SL 185QQ #202 well in the Grand Bay field was
spud and reached total depth of 9,680 feet MD/TVD. The well encountered
104 feet of net pay in 15 sands between 5,516 and 9,042 feet and has
been completed as a commercial producer and tied back to our Grand Bay
facilities.

In July 2012, the North Tiger SL 20433 #1 well in Breton Sound Block 19
was spud and reached total depth of 9,532 feet MD/9,300 feet TVD. The
well encountered 59 feet of net pay in 6 sands. Completion operations on
the well are ongoing with the well expected to be a commercial producer
and tied back to our Breton Sound 18 facilities.

Together, the Jupiter and North Tiger wells encountered 15, previously
unbooked, new pool discoveries.

Development drilling, as well as our recompletion and workover programs,
ran slightly behind schedule during the quarter. Timing of our ongoing
recompletion and workover program is expected to be affected for the
balance of 2012 by a temporary shortage of workover rigs for inland
water operations in South Louisiana. Following an incident involving a
workover rig of one of our vendors while working for a neighboring
operator, all of the vendor′s rigs were taken out of service pending a
full coastguard inspection and reinstatement of insurance coverage. As a
result of such events, there is currently an approximately eight week
wait for access to workover rigs in our principle area of operations.
This is expected to result in delays in commencement of well maintenance
and recompletions requiring workover barge rigs.

Production Highlights

• 
  Oil and gas production of 195.1 thousand barrels of oil ('MBO?) and
  761.6 thousand cubic feet of gas ('MCFG?), or 322.1 MBOE (61% oil) for
  the second quarter 2012, up 48% from 217 MBOE for the second quarter
  2011;
  
• 
  Average daily production of 3,539 net barrels of oil equivalent per
  day ('BOEPD?) for the second quarter, 27% higher than during the first
  quarter 2012; and
  
• 
  Average oil and gas prices down 3.3% and 18.5% for the second quarter
  relative to the first quarter 2012.
  

Increases in production year-over-year and compared to the 2012 first
quarter reflect investments in infrastructure de-bottlenecking and
recompletions during the second half of 2011 and the first quarter 2012.
The Jupiter and North Tiger wells are both expected to come onto
production during the third quarter and, subject to testing and
completion, the Mesa Verde well is expected to come onto production late
in the quarter or early in the fourth quarter.

Reserve Highlights

• 
  Quarter-end Company estimate of SEC proved reserves consisted of 7.973
  million barrels of oil ('MMBO?) and 67.718 billion cubic feet of gas
  ('BCFG?), or 19.260 million barrels of oil equivalent ('MMBOE?), up
  0.8% from 19.099 MMBOE of proved reserves at end of first quarter 2012
  or up 1.5% from 18.969 MMBOE of proved reserves at year-end 2011;
  
• 
  Reserve replacement ratio of 151% compared to year-end 2011;
  
• 
  Proved developed reserves comprised 20% of quarter-end proved reserves
  compared to 22% of proved reserves at December 31, 2011; and
  
• 
  Quarter-end Company estimate of 3P reserves totaled 74.438 MMBOE.
  

Reserve growth and reserve replacement ratio reflect conversion of
reserves through the recompletions undertaken during the first quarter,
updated commodity pricing and revised timing of capital expenditures and
does not reflect unbooked new pool discoveries from the Jupiter and
North Tiger wells drilled subsequent to June 30, 2012.

Development Plans

• 
  Low risk recompletions, thru-tubing plugbacks and workovers from
  inventory of 56 proved developed non-producing ('PDNP?) opportunities
  in 10 fields;
  
• 
  Development of proved undeveloped ('PUD?) reserves from inventory of
  90 PUD opportunities in 26 wellbores in 5 fields; and
  
• 
  Strategic partnerships and joint ventures for risk-sharing on
  exploratory ultra-deep prospects at Grand Bay and Vermilion 16.
  

Our near term development plans are focused on proved undeveloped
opportunities and conversion of PDNP opportunities. At June 30, 2012,
permitting had been completed and was underway on several proved
undeveloped wells and development drilling had begun at Vermilion 16
Field.

As noted above, three development wells have been drilled and cased
(Jupiter, North Tiger and Mesa Verde) and are in various stages of being
completed and brought on line as of the date of this report. We expect
to drill at least one more development well before the end of 2012 and
expect to drill up to seven development wells per year thereafter.

Financial Position and CAPEX Highlights

• 
  $33.7 million of cash on hand at June 30, 2012;
  
• 
  $13.1 million of working capital at June 30, 2012;
  
• 
  $21.8 million of CAPEX for second quarter 2012, including $12.1
  million on drilling and $8.4 million on recompletions and workovers;
  
• 
  Between $35-40 million CAPEX planned for balance of 2012; and
  
• 
  2012 CAPEX budget fully funded by cash on hand and projected operating
  cash flow.
  

Saratoga fully funded its CAPEX budget during the second quarter of
2012, as it has done for more than three years, from its cash on hand
and operating cash flows.

Management Comments

Michael O. Aldridge, Chief Financial Officer, commented 'The second
quarter of 2012 was one of continued progress with respect to
production, EBITDAX and cash flow growth, as well as an increase in
development drilling activity, which should result in continued positive
growth in coming quarters.'

Mr. Aldridge added 'We have engaged Mobius Risk Group to assist us in
the process of implementing a hedging strategy that involves layering in
price protection to guard against short-term adverse commodity price
moves and the resulting impact on our second half of 2012 business plan.
At this time, we are actively negotiating volumes and length of hedges
with prospective counterparties and we will continue to layer in hedges
to protect our short-, mid- and longer-term strategies.'

Conference Call Information

The company will host a conference call on Thursday, August 9, 2012 to
discuss its second quarter 2012 results and to provide a current update
on operations.

The call will begin at 10:30 AM EDT (9:30 AM CDT, 7:30 AM PDT) and
interested parties in the U.S. can participate in the call by dialing
(866) 501-1535. Interested international parties can participate in the
call by dialing (216) 672-5582. The participant passcode for both the
U.S. and international call is 11426728. Alternatively, the audio
content of the call can be accessed on the Company′s web site at www.saratogaresources.com.
The call will be archived on the Company web site for parties who are
unable to participate in the live call. Also, a written transcript of
the call will be available on the Company′s website beginning 72 hours
after the call.

Further details, including a slide presentation accompanying the call,
will be accessible on the Company′s website at www.saratogaresources.com
in advance of the call.

About Saratoga Resources

Saratoga Resources is an independent exploration and production company
with offices in Houston, Texas and Covington, Louisiana. Principal
holdings cover 32,185 gross/net acres, mostly held-by-production (all
depths), currently located in the transitional coastline and protected
in-bay environment on parish and state leases of south Louisiana. Most
of the company's large drilling inventory has multiple pay objectives
that range from as shallow as 1,000 feet to the ultra-deep prospects
below 20,000 feet in water depths of less than 10 feet. For more
information, go to Saratoga's website at www.saratogaresources.com
and sign up for regular updates by clicking on the Updates button.

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 complete
wells, fund the company′s development program and grow reserves,
production, revenues and profitability, ability to reach and sustain
target production levels, ability to secure commitments to participate
in exploration of deep shelf prospects, and the ultimate outcome of such
efforts. 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.

Non-GAAP Financial Measures

Discretionary Cash Flow is a non-GAAP financial measure.

Discretionary Cash Flow 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. Discretionary cash flow 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?). Discretionary cash flow 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 Discretionary Cash Flow may
not be comparable to similarly titled measures used by other companies.

The table below reconciles the most directly comparable GAAP financial
measure to Discretionary Cash Flow.

EBITDAX is a non-GAAP financial measure.

EBITDAX 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 EBITDAX 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.
EBITDAX 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?). EBITDAX 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
EBITDAX may not be comparable to similarly titled measures used by other
companies.

The table below reconciles the most directly comparable GAAP financial
measure to EBITDAX.

Saratoga Resources, Inc.

Brad Holmes, Investor Relations,
713-654-4009

or

Thomas Cooke, CEO, 713-458-1560

or

Andrew
Clifford, President, 713-458-1560

or

Michael Aldridge, CFO,
713-458-1560

www.saratogaresources.com