RAME Ram Energy Resources, Inc. (MM)

RAM Energy Resources, Inc. (Nasdaq: RAME) today announced first quarter 2006 earnings and operating results for its recently-acquired subsidiary, RAM Energy, Inc. RAM Energy's net income in the period was $2.8 million, or $1,195.41 per diluted share, an 85 percent increase over net income of $1.5 million, or $644.44 per diluted share, in the same quarter last year. This substantial increase was driven by significantly higher oil and gas prices partially offset by lower total production, increased operating expenses and higher interest expense. Cash flow, a non-GAAP measure, was $6.3 million for the first quarter of 2006, compared to cash flow of $7.0 million in the first quarter of 2005. See the attached table for reconciliation of this non-GAAP financial measure to the corresponding GAAP amounts of cash provided by operating activities of $7.9 million for the first quarter of 2006 and $2.4 million for the same quarter in 2005. Production Total production for the first quarter 2006 was 318 thousand barrel equivalents (BOE) of oil and natural gas, a 9.6 percent decrease compared to the year-ago quarter of 352 thousand BOE. The decline is primarily attributable to the vesting of an outstanding back-in interest in favor of a non-operating partner in the Bridgeport field in late 2005 and, to a lesser extent, natural production decline. The vesting of the reversionary interest had the effect of reducing daily production by 246 BOE, or a total of 22,100 BOE for the first quarter of 2006. Average daily production for the first quarter 2006 was 3,534 BOE compared to 3,908 BOE for the same quarter last year. Commodity Prices and Revenues Including the impact of derivative financial instruments, the company's realized price for oil increased 23 percent to an average of $55.98 per barrel in the first quarter of 2006, compared with last year's first quarter average price of $45.69 per barrel. The company's realized price for gas, including the impact of hedges, increased 8 percent to $6.29 per Mcf compared to $5.85 per Mcf in the first quarter of 2005. The increase in realized oil and gas prices more than offset the effect of the decrease in production resulting from the back-in interest, allowing oil and gas sales to increase 13 percent to $16.8 million for the first quarter of 2006 compared to $14.8 million in the same quarter of 2005. With the addition of realized and unrealized gains and losses on derivatives, total revenues for the first quarter rose 25 percent to $18.5 million. Costs and Expenses Production costs totaled $5.1 million or $16.09 per BOE in the first quarter of 2006, which is 27 percent higher than the $12.68 per BOE for the previous year's quarter. Lower total production compounded by higher production taxes associated with the increase in oil and gas prices, increased oil services costs and increased lease power and fuel costs were the principal contributors to the rise in per BOE production costs. Total amortization and depreciation expense for the first quarter was $3.2 million, of which $3.0 million was attributable to oil and gas properties. Amortization and depreciation expense of $9.50 per BOE associated with oil and gas properties and equipment rose 16 percent compared to the $8.21 per BOE level in last year's quarter. The higher charges per BOE are attributable to a larger property base and an increased amortization rate. Net interest expense for the quarter rose 27 percent to $3.5 million compared to $2.8 million in last year's first quarter, principally as a result of higher effective interest rates in this year's quarter. First Quarter 2006 Operations Update Oil and gas related capital expenditures were $5.2 million in the quarter, of which $4.0 million was allocated to drilling new development wells, $1.1 million for exploratory costs with the remainder spent on unproved property acquisition costs. Total non-acquisition capital expenditures of $5.5 million in the first quarter of 2006 are in line with RAM's targeted non-acquisition capital budget of $24.3 million for the 2006 year. RAM participated in the drilling of 20 gross (20 net) development wells and three gross (1.74 net) exploratory wells. All of the development wells and one gross (.24 net) exploratory well are capable of commercial production. In the Electra/Burkburnett area of North Texas, the company's largest producing area, RAM drilled 20 net wells of which 14 were completed as producing wells and six were in various stages of completion at the end of the first quarter. The company owns a 100 percent working interest in, and operates all 20 of the wells. In the company's Barnett Shale acreage in Jack and Wise Counties, Texas, RAM participated in the drilling of the EOG operated Ashe #1 well, which has been completed since the end of the quarter and is flowing natural gas. RAM owns a 23.6 percent working interest in the Ashe #1, the first well drilled by EOG on the company's jointly owned acreage. The company recently acquired additional seismic data covering a portion of its acreage. As a result, RAM currently owns 18 square miles of 3-D seismic data covering approximately 25 percent of its 28,069 gross (6,700 net) acres in the Barnett Shale. The seismic data has been interpreted and is being used to target additional drilling locations. The Burress #2H well, also targeting the Barnett Shale, was drilled in the fourth quarter 2005 and completed during the first quarter of 2006. Currently the company owns an interest in eight (gross) Barnett Shale producing wells, two of which are operated by RAM, five of which are operated by Chief and one of which is operated by EOG. Average daily production attributable to the company's interest in Barnett Shale wells in the first quarter was 17 Bbls of oil and 1,073 Mcf of gas or 196 BOE. During the first quarter, the third in a planned series of wells in the company's emerging resource play was drilled under farmout agreements covering portions of RAM's 70,000 gross (11,000 net) acre lease block in Reeves County, Texas. The Johnson 1-4H, a horizontal well, was drilled to a total depth of 11,751 feet and is currently being evaluated in the Barnett Shale. Also during the first quarter, J. Cleo Thompson completed a ten square mile 3-D seismic survey and commenced the drilling of the Fasken Ranch 34-2H, a horizontal well targeting the Woodford and Barnett Shales on RAM's acreage. At the end of the quarter the well had been drilled to 8,950 feet and was being evaluated. Merger Completed With Tremisis On May 8, 2006 RAM Energy, Inc., previously a privately held company consummated a merger with a subsidiary of Tremisis Energy Acquisition Corporation, a publicly held specified purpose acquisition company. Following the merger, the corporate name of Tremisis was changed to RAM Energy Resources, Inc. and on May 9, the common stock, warrants and units began trading on the Nasdaq Capital Market under the symbols RAME, RAMEW and RAMEU, respectively assigned to the newly combined organization. In connection with the merger, 25.6 million Tremisis shares were issued to stockholders of RAM Energy plus $30 million in cash such that the resulting RAM Energy Resources has a total of approximately 33.3 million common shares outstanding currently. Larry Lee, Chairman and CEO of RAM Energy was, following the merger, appointed by the board of directors to the posts of Chairman and CEO of RAM Energy Resources. "The merger provided RAM an attractive route to becoming a publicly traded company and the attendant enhanced access to the public capital markets to support future growth. We look forward to engaging in the same acquisition, exploitation, development and exploration activities that we have since our founding in 1987 with the goal of consistent profitable growth over time," said Mr. Lee. Forward-Looking Statements This release includes certain statements that may be deemed to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements in this release, other than statements of historical facts, that address estimates of future production, operating costs, capital spending, cash flow, NYMEX prices of oil and gas and company realizations, the impact of oil and gas hedging activities, and events or developments that the company expects or believes are forward-looking statements. Although the company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include oil and gas prices, exploitation and exploration successes, actions taken and to be taken by the government as a result of political and economic conditions, continued availability of capital and financing, and general economic, market or business conditions as well as other risk factors described from time to time in the company's filings with the SEC. The company assumes no obligation to update publicly such forward-looking statements, whether as a result of new information, future events or otherwise. RAM Energy Resources, Inc. is an independent energy company engaged in the acquisition, exploitation, exploration, and development of oil and gas properties and the marketing of natural gas and crude oil. Company headquarters are in Tulsa, Oklahoma, and its common shares are traded on the Nasdaq under the symbol RAME. -0- *T RAM Energy, Inc. Condensed consolidated statements of operations (in thousands, except share and per share amounts) (unaudited) Three months ended March 31, ------------------ 2006 2005 ------------------ OPERATING REVENUES: Oil and natural gas sales $16,810 $14,819 Realized and unrealized gains (losses) on derivatives 1,408 (422) Other 244 370 ------------------ Total revenues 18,462 14,767 OPERATING EXPENSES: Oil and natural gas production taxes 810 764 Oil and natural gas production expenses 4,306 3,698 Amortization and depreciation 3,213 2,959 Accretion expense 133 78 General and administrative, overhead and other expenses 1,959 2,058 ------------------ Total operating expenses 10,421 9,557 ------------------ Operating income 8,041 5,210 OTHER INCOME (EXPENSE): Interest expense (3,529) (2,773) Interest income 27 9 ------------------ INCOME BEFORE INCOME TAXES 4,539 2,446 INCOME TAX PROVISION 1,725 929 ------------------ NET INCOME $2,814 $1,517 ================== EARNINGS PER SHARE: Basic $1,238.01 $667.40 Diluted $1,195.41 $644.44 WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 2,273 2,273 Diluted 2,354 2,354 ================== *T -0- *T RAM Energy, Inc. Condensed consolidated balance sheets (in thousands, except share and per share amounts) December March 31, 31, 2006 2005 -------------------- ASSETS (unaudited) CURRENT ASSETS: Cash and cash equivalents $1,112 $70 Accounts receivable- Oil and natural gas sales 6,700 7,422 Joint interest operations, net of allowance of $50 ($31 at December 31, 2005) 634 566 Related Party 101 142 Other, net of allowance of $13 ($13 at December 31, 2005) 146 175 Prepaid expenses 618 756 Other current assets 630 484 -------------------- Total current assets 9,941 9,615 PROPERTIES AND EQUIPMENT, AT COST: Oil and natural gas properties and equipment, using full cost accounting 165,826 160,704 Other property and equipment 6,420 7,276 -------------------- 172,246 167,980 Less accumulated amortization and depreciation 38,807 36,848 -------------------- Net properties and equipment 133,439 131,132 OTHER ASSETS: Deferred loan costs, net of accumulated amortization of $5,246 ($4,905 at December 31, 2005) 1,371 1,613 Other 919 916 -------------------- Total assets $145,670 $143,276 ==================== LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES: Accounts payable: Trade $ 5,125 $ 4,343 Oil and natural gas proceeds due others 2,645 3,201 Other 31 - Related party 6 41 Accrued liabilities: Compensation 1,005 749 Interest 1,178 1,745 Income taxes 121 146 Derivative liabilities 2,331 3,510 Long-term debt due within one year 428 560 -------------------- Total current liabilities 12,870 14,295 OIL & NATURAL GAS PROCEEDS DUE OTHERS 2,290 1,972 LONG-TERM DEBT 111,689 112,286 DEFERRED AND OTHER NON-CURRENT INCOME TAXES 27,025 25,300 ASSET RETIREMENT OBLIGATION 10,251 10,192 COMMITMENTS AND CONTINGENCIES - - STOCKHOLDERS' DEFICIT: Common stock, $10 par value; authorized --5,000 shares; issued and outstanding - 2,273 shares 23 23 Additional paid-in capital 73 73 Accumulated deficit (18,551) (20,865) -------------------- Stockholders' deficit (18,455) (20,769) -------------------- Total liabilities and stockholders' deficit $145,670 $143,276 ==================== *T -0- *T RAM Energy, Inc. Condensed consolidated statements of cash flows (in thousands) (unaudited) Three months ended March 31, ---------------- 2006 2005 ---------------- OPERATING ACTIVITIES: Net income $2,814 $1,517 Adjustments to reconcile net income to net cash provided by operating activities: Amortization and depreciation- Oil and natural gas properties and equipment 3,023 2,868 Amortization of deferred loan costs and Senior notes discount 353 210 Other property and equipment 190 107 Accretion expense 133 78 Loss on sale of other property and equipment 27 - Unrealized gain on derivatives (2,979) (77) Deferred income taxes 1,725 1,683 Changes in operating assets and liabilities Accounts receivable 724 (320) Prepaid expenses and other current assets (8) 138 Accounts payable 222 (2,278) Accrued liabilities and other 1,705 (1,575) ---------------- Total adjustments 5,115 834 ---------------- Net cash provided by operating activities 7,929 2,351 ---------------- INVESTING ACTIVITIES: Payments for oil and natural gas properties and equipment (5,155) (2,697) Proceeds from sales of oil and natural gas properties and equipment 33 - Payments for other property and equipment (425) (64) ---------------- Net cash used in investing activities (5,547) (2,761) ---------------- FINANCING ACTIVITIES: Payments on long-term debt (4,097) (1,621) Payments of loan fees (100) (141) Proceeds from borrowings on long-term debt 3,357 2,668 Dividends paid (500) - ---------------- Net cash provided by (used in) financing activities (1,340) 906 ---------------- Increase in cash and cash equivalents 1,042 496 CASH AND CASH EQUIVALENTS, beginning of period 70 1,175 ---------------- CASH AND CASH EQUIVALENTS, end of period $1,112 $1,671 ================ SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest $1,667 $1,810 Cash paid for income taxes $ 25 $ - ================ DISCLOSURE OF NONCASH FINANCING ACTIVITIES: Accrued interest added to principal balance of revolving Credit Facility $2,026 $1,514 ================ *T -0- *T RAM Energy, Inc. Quarter Ended March 31, Increase --------------- 2005 2006 (Decrease) ------- ------- ----------- (in thousands, except per unit amounts) Production volumes: Oil and condensate (MBbls) 206 187 -9.1% Natural gas liquids (MBbls) 49 31 -36.4% Natural gas (MMcf) 584 600 2.8% Total (Mboe) 352 318 -9.6% Average realized prices (before effects of hedging): Oil and condensate (per Bbl) $48.42 $61.05 26.1% Natural gas liquids (per Bbl) $31.12 $39.02 25.4% Natural gas (per Mcf) $ 5.72 $ 6.97 21.7% Total per boe $42.13 $52.85 25.4% Effect of settlement of hedging contracts: Oil and condensate (per Bbl) $(2.73) $(5.07) 85.7% Natural gas liquids (per Bbl) $ - $ - 0.0% Natural gas (per Mcf) $ 0.13 $(0.68) -623.1% Average realized prices (after effects of hedging): Oil and condensate (per Bbl) $45.69 $55.98 22.5% Natural gas liquids (per Bbl) $31.12 $39.02 25.4% Natural gas (per Mcf) $ 5.85 $ 6.29 7.5% Expenses (per Boe): Oil and natural gas production taxes $ 2.17 $ 2.55 17.5% Oil and natural gas production expenses $10.51 $13.54 28.8% Amortization of full-cost pool $ 8.21 $ 9.50 15.7% General and administrative $ 5.85 $ 6.16 5.3% *T -0- *T RAM's hedge positions at March 31, 2006 are show in the following table: Crude Oil (Bbls) -------------------------------------------------------------- Floors Ceilings -------------------------------------------------------------- per day Price per day Price Collars 2006 1,500 $48.30 1,500 $67.99 2007 1,000 $35.00 1,000 $69.74 2008 800 $50.00 800 $86.53 Bare Floors 2006 250 $40.00 Secondary Floors ------------------------------------------------ Year per day Price 2006 - - 2007 - - Natural Gas (Mmbtu) -------------------------------------------------------------- Floors Ceilings -------------------------------------------------------------- per day Price per day Price Collars 2006 5,000 $6.22 5,000 $ 8.88 2007 4,247 $7.43 4,247 $11.62 2008 4,000 $7.50 4,000 $13.50 Secondary Floors ------------------------------------------------ Year Per day Price 2006 5,000 $9.50 2007 4,000 $12.00 RAM's hedging contracts for both oil and natural gas continue through June 2008. Natural gas secondary floors for 2006 & 2007 are for April thru October. Floors and ceilings for both oil and natural gas for 2008 are for January thru June. For the quarter ended March 31, 2006, RAM's average daily production was 2,079 Bbls of oil, 6,664 Mcf of natural gas, and 343 Bbls of NGLs. *T -0- *T RAM ENERGY, INC. NON-GAAP FINANCIAL MEASURE Cash flow, a non-GAAP measure, represents cash provided by operating activities before the impact of discontinued operations, changes in working capital items related to operating activities, all exploration costs and further adjusted for payments on derivative transactions no longer qualifying for hedge accounting which are reflected as investing activities under GAAP. This non-GAAP measure is presented because management believes it is a useful adjunct to cash provided by operating activities under accounting principles generally accepted in the United States (GAAP). This non-GAAP cash flow measure is widely accepted as a financial indicator of an oil and gas company's ability to generate cash which is used to internally fund exploration and development activities and to service debt and is comparable to targets to be established by the company. This non-GAAP measure is not a measure of financial performance under GAAP and should not be considered as an alternative to cash provided (used) by operating, investing, or financing activities as an indicator of cash flows, or as a measure of liquidity. CASH FLOW: Quarter Ended March 31, 2006 2005 -------------- (in thousands) Net income (before effects of hedging) $1,406 $1,939 Amortization and depreciation - Oil and natural gas properties and equipment 3,023 2,868 Amortization of deferred loan costs and Senior notes discounted 353 210 Other property and equipment 190 107 Accretion expense 133 78 Loss on sale of other property and equipment 27 - Deferred income taxes (before effects of hedging) 1,190 1,843 -------------- Cash flow (A Non-GAAP Measure), adjusted for effects of hedging $6,322 $7,045 Net effect of hedging (1,036) (659) Net changes in working capital 2,643 (4,035) -------------- Net cash provided by operating activities, per consolidated statements of cash flows $7,929 $2,351 ============== *T