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

Saratoga Resources, Inc. (NYSE MKT: SARA; the 'Company? or 'Saratoga?)
today announced financial and operating results for the quarter ended
September 30, 2012, including the estimated impact of Hurricane Isaac.

Key Financial Results

• 
  Oil and gas revenues of $16.5 million for the third quarter 2012
  compared to $18.9 million for the third quarter 2011;
  
• 
  Lease operating expenses ('LOE?) of $4.6 million ($20.06 per BOE) for
  third quarter 2012 compared to $4.6 million ($18.64 per BOE) for third
  quarter 2011;
  
• 
  General and administrative expenses ('G&A?) of $2.0 million ($8.56 per
  BOE) for third quarter 2012 compared to $2.6 million ($10.62 per BOE)
  for third quarter 2011;
  
• 
  Net loss of $0.5 million, or $0.02 per fully diluted share, for third
  quarter 2012 compared to net income of $6.2 million, or $0.24 per
  fully diluted share, for the third quarter 2011;
  
• 
  EBITDAX of $8.5 million ($37.00 per BOE) for the third quarter 2012
  compared to $11.5 million ($46.60 per BOE) for the third quarter 2011;
  and
  
• 
  Discretionary cash flow of $4.4 million, or $0.14 per fully diluted
  share, for the third quarter 2012 compared to discretionary cash flow
  of $7.5 million, or $0.29 per fully diluted share, for the third
  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 12.9% decrease in oil and gas revenues for the third quarter 2012
reflects the effects of Hurricane Isaac, which resulted in production
being shut-in for 17 days during the quarter and a resulting decrease in
oil production volume (down 15.3% compared to the third quarter 2011),
and decreased prices realized from gas sales (down 7.7%). Those
decreases were partially offset by an increase in gas production (up
10.8% compared to third quarter 2011) and a slight increase in prices
realized from oil sales (up 0.6%).

While LOE was flat from the 2011 quarter, there was a 7.6% increase in
LOE on a per BOE basis, reflecting the fixed component of LOE.

G&A decreased by 24.6% over the corresponding quarter in 2011, and was
19% lower on a per LOE basis, based on decreases in head count and lower
stock based compensation.

While the 2012 third quarter reflected a net loss compared to net income
in the corresponding quarter in 2011, the 2012 quarter reflected
increased workover activity and expense (up $0.3 million) and a
substantial decline in dry hole costs (down $3.7 million) while the 2011
quarter reflected a one-time gain from the extinguishment of debt of
$7.7 million.

Operational Highlights

Operational highlights for third quarter 2012 included:

• 
  Completed development drilling operations on the Jupiter, North Tiger
  and Mesa Verde wells; Jupiter well brought onto production during the
  quarter and North Tiger and Mesa Verde wells brought onto production
  post-quarter end;
  
• 
  101 gross (100 net) wells in production at September 30, 2012; and
  
• 
  32,119 gross (32,119 net) acres in 12 fields under lease at September
  30, 2012.
  

During the third quarter 2012, Saratoga completed development drilling
operations on the Mesa Verde, Jupiter and North Tiger wells, with the
Jupiter well brought onto production during the quarter. As a result of
delays arising in connection with Hurricane Isaac, the Mesa Verde and
North Tiger wells were not brought onto production until shortly after
quarter end. Saratoga′s investment during the quarter with respect to
the Mesa Verde, Jupiter and North Tiger wells totaled $23.1 million.
Saratoga also invested $1.9 million on recompletions and an additional
$0.3 million on workovers. As with Saratoga′s development drilling
program, delays were experienced in the recompletion and workover
program as a result of Hurricane Isaac.

The Mesa Verde SL 3763 #14 well in Vermilion 16 field was spud on May
14, 2012 and reached a total depth of 16,258 feet measured depth
('MD?)/true vertical depth ('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 and
was completed in the LF-H sand in October 2012. The well tested on
October 12, 2012 at a gross rate of 190 barrels of oil per day ('BOPD?),
4,066 thousand cubic feet of gas per day ('MCFPD?), or net 685 barrels
of oil equivalent ('BOEPD?), on a 14/64? choke with flowing tubing
pressure ('FTP?) of 4,300 psi.

In July 2012, the Jupiter SL 185QQ #202 well in the Grand Bay field was
spud and reached total depth of 9,688 feet MD/TVD. The well encountered
104 feet of net pay in 15 sands between 5,516 and 9,042 feet and was
completed in the 15 sand in early August 2012. The well tested on August
14, 2012 at a gross rate of 245 BOPD and 650 MCFPD, or net 254 BOEPD, on
15/64? choke with FTP of 860 psi.

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 and was completed as a
dual producer in October 2012. The well tested on October 15, 2012 at a
gross rate of 517 BOPD and 1,457 MCFPD on a 14/64? choke with FTP of
1,900 psi from the 7,100′ sand in the short string and 258 BOPD and 351
MCFPD on a 17/64? choke with FTP of 580 psi from the Cib Carst sand in
the long string, or combined net 840 BOEPD.

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

The lingering effects of Hurricane Isaac resulted in deferrals and
delays in restart of facilities, completion operations, maintenance
operations and equipment installations and pushed back testing and
completion of the North Tiger and Mesa Verde wells and the commencement
of production from those wells and are expected to result in various
development drilling operations being pushed back. Similarly, going
forward, we anticipate delays and deferrals of various projects in our
recompletion and workover program, as well as our maintenance program,
as a result of the lingering effects of the hurricane as well as the
previously announced temporary shortage of workover rigs.

Production Highlights

• 
  Oil and gas production of 137.9 thousand barrels of oil ('MBO?) and
  555.1 thousand cubic feet of gas ('MCFG?), or 230.4 MBOE (59.9% oil)
  for the third quarter 2012, down 6.5% from 246.4 MBOE for the third
  quarter 2011;
  
• 
  Average daily production of 2,505 net barrels of oil equivalent per
  day ('BOEPD?) for the third quarter, 28% lower than during the second
  quarter 2012; and
  
• 
  Average oil prices down 6% and average gas price up 32% for the third
  quarter relative to the second quarter 2012.
  

The decreases in oil production and total production year-over-year and
compared to the 2012 second quarter reflect the total shut-in of
production for 17 days during the quarter in the wake of Hurricane
Isaac, partially offset by production increases attributable to
investments in infrastructure de-bottlenecking and recompletions during
the second half of 2011 and the first half of 2012 and the commencement
of production from the Jupiter well mid-third quarter. The North Tiger
and Mesa Verde wells both came onto production in October.

Development Plans

• 
  Capital spending for the 4^th quarter has been reduced to
  minimum amounts, primarily focused on low risk recompletions,
  thru-tubing plugbacks and workovers from our inventory of 62 proved
  developed non-producing ('PDNP?) opportunities in 8 fields as the
  company will focus on strengthening cash positions which were
  negatively impacted by Hurricane Isaac;
  
• 
  Continue exploring possible strategic partnerships and joint ventures
  for risk-sharing on exploratory ultra-deep prospects at Grand Bay and
  Vermilion 16; and
  
• 
  Focus the remainder of the year on recovery of cash flow and
  rebuilding cash reserves enabling us to enter next year in a strong
  position.
  

Our near term development plans are focused on the Company′s inventory
of 87 proved undeveloped opportunities in 24 proposed wellbores across 4
fields and conversion of PDNP opportunities. At September 30, 2012,
permitting had been completed and was underway on several proved
undeveloped wells.

As a result of the delays arising from Hurricane Isaac we have pushed
back a development well previously planned for the fourth quarter of
2012. We expect to drill up to seven development wells per year
beginning in 2013.

Financial Position and CAPEX Highlights

• 
  $8.3 million of cash on hand at September 30, 2012;
  
• 
  $6.5 million temporary working capital deficit at September 30, 2012
  due primarily to estimated $7 million in deferred revenue due to
  Hurricane Isaac;
  
• 
  $25.9 million of CAPEX for third quarter 2012, including $23.1 million
  on drilling and $2.2 million on recompletions and workovers. Due to
  numerous technical difficulties encountered in both new drills and
  recompletions, the total amount spent was approximately 20% over the
  budgeted amount;
  
• 
  2012 CAPEX budget fully funded by cash on hand and projected operating
  cash flow; and
  
• 
  Commenced implementation of hedging program.
  

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

During the 2012 third quarter, Saratoga began implementation of a
hedging program to manage commodity price risk. At quarter end, Saratoga
had hedges in place covering 92,000 barrels of oil between October 1,
2012 and December 30, 2012 at prices ranging from $108.00 to $110.05 per
barrel. Subsequent to the end of the third quarter we entered into an
additional crude oil swap contract for the period November 1, 2012 to
December 30, 2012 covering 300 barrels of oil per day at $110.85.

Management Comments

Michael O. Aldridge, Chief Financial Officer, commented 'Hurricane Isaac
made the third quarter of 2012 a challenging quarter. We lost
production, revenues and cash flow as a result of our being shut-in for
fully 1/6 of the quarter and experienced, and will continue to
experience, lingering challenges in getting back to full speed in the
hurricane′s aftermath. Despite the challenges, we continued to make
progress on several fronts, most notably the successful completion and
testing of our Jupiter, North Tiger and Mesa Verde wells. Those wells
are expected to both add new reserves and enhance our production going
forward while also serving to protect our deep rights in the Vermilion
16 field following our successful Mesa Verde well.'

Mr. Aldridge added 'We also made substantial progress in our risk
management strategy with the commencement of our hedging strategy to
guard against short-term adverse commodity price moves and the resulting
impact on our second half of 2012 business plan. During the quarter, we
layered in hedges over the balance of 2012 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 Tuesday, November 13, 2012 to
discuss its third 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 64426784. 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 32,119 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