RAME Ram Energy Resources, Inc. (MM)

RAM Energy Resources, Inc. (Nasdaq: RAME) today announced second quarter 2009 earnings and financial highlights.

Second quarter production totaled 652 thousand barrel of oil equivalents (BOE), up 1.2 % from 644 thousand BOE in the second quarter 2008. Sales of oil, natural gas liquids (NGLs) and natural gas totaled $23.5 million, 59% below comparative sales in the second quarter of last year, principally the result of a dramatic fall in the price of each of the company’s principal commodities.

Free cash flow (a non-GAAP measure) was $16.9 million, or $0.23 per share, for the second quarter 2009 compared to $24.8 million, or $0.36 per share, in last year’s second quarter. RAM’s free cash flow of $16.9 million more than fully funded the second quarter capital expenditures of $4.5 million. Similarly, EBITDA (a non-GAAP measure) was $20.3 million for the second quarter, representing a decrease of 37% from the same period last year.

For the second quarter 2009, RAM’s adjusted net income was $2.9 million, or $0.04 per common share. The calculation of adjusted net income excludes the after tax impact of unrealized, non-cash, mark-to-market (MTM) losses associated with oil and natural gas derivatives covering future periods. Such MTM losses are typically not included in the published estimates of the company’s financial results made by certain securities analysts. During the second quarter an unrealized, non-cash, pre-tax MTM loss of $23.8 million attributable to future period oil and natural gas derivatives was incurred primarily as a result of an increase in the price of oil at June 30, 2009 compared to prevailing prices at March 31, 2009. Including the MTM losses noted above and realized gains associated with contract settlements net of amortized premium costs of derivatives during the second quarter 2009, RAM reported a net loss during the second quarter of $11.8 million, or a loss of $0.16 per common share.

“Our asset base dominated by oil and liquids, above average length of reserve life, derivatives position, ample liquidity under our loan facility and excess cash flow relative to non-acquisition capital spending provides us with both operational and financial flexibility to meet our 2009 targets while positioning the company for future growth,” said Larry Lee, Chairman and CEO.

Commodity Prices and Revenues

The company’s realized price for oil fell 55% to an average of $55.98 per barrel in the second quarter of 2009, compared with last year’s second quarter average realized price of $123.15 per barrel. Similarly, the company’s realized price for natural gas dropped 69% to an average of $3.06 per thousand cubic feet (Mcf) compared to an average of $9.94 per Mcf in the second quarter of 2008. In addition, the price of NGLs decreased 59%, averaging $24.96 per barrel for this year’s second quarter. The negative impact from the substantial decline in the price of commodities compared to last year’s historic high price levels, however, was somewhat offset by the company’s derivative position.

In the second quarter 2009 the average realized price of oil rose 44% and the average realized price for natural gas declined 21%, compared to realized prices in the first quarter of the year. The substantial change in commodity prices together with monetization of certain hedge positions during the quarter resulted in net realized derivative gains of $10.7 million and unrealized MTM derivative losses of $23.8 million for the second quarter. The combined net loss of $13.1 million effectively offset a substantial portion of the quarter’s oil and gas revenue of $23.5 million, reducing total revenues to $10.4 million for the quarter. In the year-ago quarter, the realized prices of oil and natural gas both rose substantially. The resulting impact from realized and unrealized losses totaled $41.0 million and, as a result, total revenues for the second quarter 2008 were reduced to $16.6 million.

Costs and Expenses

Production expenses were $13.99 per BOE in the second quarter of 2009, or a total of $9.1 million, 5% below the $14.69 per BOE in the previous year’s quarter. Production taxes were $1.42 per BOE in this year’s second quarter, or a total of $0.9 million, 73% below the $5.19 per BOE posted in the 2008 quarter. The decrease is principally the result of lower commodity prices in the current quarter compared to those prevailing in the second quarter of 2008. General and administrative expenses of $3.7 million declined 32% below those expenses in last year’s second quarter of $5.5 million as a result of accounting function consolidation, lower employee related costs and lower professional fees in the 2009 period.

Capital Expenditures

Capital expenditures totaled $4.5 million in the second quarter 2009; $4.3 million was allocated to development and exploratory activities and $0.2 million for the acquisition of proved properties. During the second quarter RAM carried out a variety of well workovers and recompletions and participated in the drilling of six gross (six net) development wells, all of which were completed and capable of commercial production. In addition the company finalized the drilling and completion of two gross (two net) wells drilled in the previous quarter. Based on the ability to hold production relatively stable through the first half and at a level consistent with the achievement of the company’s previously established target production level of 2.5 million BOE for 2009, the non-acquisition capital budget for the year has been trimmed to $30.0 - $35.0 million from the previously disclosed range of $40.0 - $45.0 million. The focus during the second half of 2009 will concentrate on low cost, high return, workover activity and more generally on lower risk developmental activity aimed at maintaining production levels as well as processing exploratory data to identify future growth projects.

Long-Term Debt and Liquidity

As of June 30, 2009, RAM’s outstanding borrowings under its credit facility totaled $255.4 million, composed of $113.4 million of term debt and $142.0 million outstanding under its revolver, which is currently subject to a $175.0 million borrowing base. Based on the borrowing base and the amount drawn on its revolver, at mid-year RAM had $32.8 million available under its facility. In June, 2009 RAM amended the existing loan agreement to provide for greater flexibility in certain financial covenants under the loan agreement through the remaining term of the facility. In exchange for the added flexibility afforded by these changes to the credit facility, RAM agreed to increase the base cash interest rate on both the revolving facility and the term facility. Based on the company’s outstanding debt balance at June 30, 2009, RAM expects the cash interest percent spread to the LIBOR floor to be 2.75% on its revolving credit facility and 8.50% on its term loan facility during the second half of the year.

Interest expense for the second quarter 2009 was $3.6 million, or $5.52 per BOE, a substantial decline from the same quarter last year of $6.2 million, or $9.62 per BOE. The decrease in interest expense was due to lower average debt balances in the current quarter and lower effective interest rates. In the second quarter 2009, the blended interest rate on borrowings was 5.7% compared to the blended rate in last year’s quarter of 11.3%. In addition, the average outstanding borrowings under the company’s credit facility in the second quarter of 2008 of $273.5 million were approximately 7% higher than in the current quarter.

Subsequent to the 2009 second quarter end, the company realized approximately $5.6 million in proceeds from non-strategic asset sales in late July. These proceeds along with cash flow in excess of capital spending are anticipated to be used to reduce existing debt during the third quarter of 2009.

Six Month 2009 Results

Six month production totaled 1.3 million BOE, up 4% from production in the first half of 2008, driven primarily by a 13% volume increase from the company’s “developing fields” and a 6% increase from “mature oil fields” which, net of the decline experienced in “mature natural gas fields”, rose a total of 52 thousand BOE over last year’s first half production. The positive impact from the increase in production in the first half of the year, however, was more than offset by the fall in the price of all commodities, resulting in a decline in total sales of oil, NGLs and natural gas to $42.6 million, 58% below the sales in the same period of 2008.

Free cash flow per share (a non-GAAP measure) for the first half of 2009 was $25.0 million, or $0.33 per share compared to $39.3 million, or $0.61 per share, for the same period last year. Free cash flow of $25.0 million more than funded capital expenditures of $17.7 million made during the first six months of the year. Similarly, EBITDA (a non-GAAP measure) was $32.1 million for the first half of 2009 compared to $56.0 million for the same period last year, a decrease of 43%.

Operational and Financial Targets

Based on first half results, the NYMEX strip of prices prevailing at June 30, 2009 for oil and natural gas, as well as revised capital expenditures planned for the second half and estimated production costs, management continues to target full year production of 2.5 million BOE. Total capital expenditures for the 2009 year have been trimmed to $30.0 - $35.0 million as a result of the company’s ability to maintain production at levels consistent with targeted annual production with lesser amounts of drilling than originally anticipated and its decision to defer natural gas projects due to the prevailing low price of the commodity. Through the first half of 2009, capital expenditures totaled $17.7 million. In addition, despite a recent amendment to the company’s senior credit facility which provides additional financial flexibility in exchange for higher interest costs, the company reaffirms the high end of its previous target of interest costs of $17.0 - $18.0 million for the 2009 year. Through the first half of the year interest expense totaled $7.2 million. Similarly, EBITDA for the first half of the year totaled $32.1 million and the company continues to expect that EBITDA will approximate the lower end of the $60.0 - $65.0 million range projected for the 2009 year. Additionally, the company anticipates that internally generated cash flow will be sufficient to fund revised non-acquisition capital expenditures planned for the second half of 2009.

RAM to Webcast Second Quarter 2008 Conference Call

The company’s teleconference call to review second quarter results will be broadcast live on a listen-only basis over the internet on Thursday, August 6 at 10:00 a.m. Central Daylight Time. Interested parties may access the webcast by visiting the RAM Energy Resources, Inc. website at www.ramenergy.com. From the home page, select the Investor Relations tab and then click on the microphone icon. The teleconference may be accessed by dialing 1.800.261.3417 (domestic) or 1.617.614.3673 (international) and providing the call identifier “42073502” to the operator. The webcast will be available for replay on the company’s website. An audio replay will be available until August 13, 2009 by dialing 1.888.286.8010 (domestic) or 1.617.801.6888 (international) and using pass code “26341263”.

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 targets for production, costs, property dispositions, EBITDA, free cash flow, estimates of capital spending, realized prices of oil and gas, the impact of oil and gas derivatives, drilling activities, borrowing availability, 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 natural gas properties and the marketing of crude oil and natural gas. Company headquarters are in Tulsa, Oklahoma, and its common shares are traded on the Nasdaq under the symbol RAME. For additional information, visit the company website at www.ramenergy.com.

  TABLE 1 RAM Energy Resources, Inc. Condensed Consolidated Balance Sheets (in thousands, except share and per share amounts)         June 30, December 31, 2009 2008 (unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 2,204 $ 164 Cash, restricted - 16,000 Accounts receivable: Oil and natural gas sales, net of allowance of $50 ($50 at December 31, 2008) 11,408 8,702 Joint interest operations, net of allowance of $515 ($515 at December 31, 2008) 801 818 Other, net of allowance of $35 ($35 at December 31, 2008) 910 4,045 Derivative assets 3,051 21,006 Prepaid expenses 1,982 2,330 Deferred tax asset 6,518 - Other current contingencies - 2,816 Other current assets   4,297     4,141   Total current assets 31,171 60,022 PROPERTIES AND EQUIPMENT, AT COST: Proved oil and natural gas properties and equipment, using full cost accounting 701,860 683,341 Other property and equipment   9,117     9,460   710,977 692,801 Less accumulated depreciation, amortization and impairment   (471,557 )   (396,301 ) Total properties and equipment 239,420 296,500 OTHER ASSETS: Deferred tax asset 44,434 28,724 Derivative assets - 4,531 Deferred loan costs, net of accumulated amortization of $1,880 ($1,282 at December 31, 2008) 5,741 4,015 Other   2,335     2,053   Total assets $ 323,101   $ 395,845   LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Accounts payable: Trade $ 20,025 $ 26,370 Oil and natural gas proceeds due others 8,912 7,218 Other 261 982 Accrued liabilities: Compensation 1,065 2,893 Interest 607 865 Franchise taxes 1,340 1,300 Income taxes 193 399 Contingencies - 16,000 Deferred income taxes - 5,779 Asset retirement obligations 1,073 1,093 Long-term debt due within one year   145     160   Total current liabilities 33,621 63,059 OIL & NATURAL GAS PROCEEDS DUE OTHERS 1,695 2,523 DERIVATIVE LIABILITIES 1,732 - LONG-TERM DEBT 255,514 250,536 ASSET RETIREMENT OBLIGATIONS 30,864 29,106 COMMITMENTS AND CONTINGENCIES 900 900   STOCKHOLDERS' EQUITY (DEFICIT): Common stock, $0.0001 par value, 100,000,000 shares authorized, 80,623,674 and 79,423,574, shares issued, 76,840,587 and 78,532,134 shares outstanding at June 30, 2009 and December 31, 2008, respectively 8 8 Additional paid-in capital 221,893 220,800 Treasury stock - 3,783,087 shares (891,440 shares at December 31,2008) at cost (6,167 ) (4,027 ) Accumulated deficit   (216,959 )   (167,060 ) Stockholders' equity (deficit)   (1,225 )   49,721   Total liabilities and stockholders' equity (deficit) $ 323,101   $ 395,845     TABLE 2 RAM Energy Resources, Inc. Condensed Consolidated Statements of Operations (in thousands, except share and per share amounts) (unaudited)               Three months ended June 30, Six months ended June 30, 2009 2008 2009 2008 REVENUES AND OTHER OPERATING INCOME: Oil and natural gas sales Oil $ 16,206 $ 36,984 $ 27,464 $ 65,644 Natural gas 4,907 15,349 10,957 26,227 NGLs 2,387 5,221 4,135 9,216 Realized gains (losses) on derivatives 10,671 (7,218 ) 18,549 (9,536 ) Unrealized losses on derivatives (23,795 ) (33,808 ) (24,802 ) (39,067 ) Other   43     117     128     211   Total revenues and other operating income 10,419 16,645 36,431 52,695   OPERATING EXPENSES: Oil and natural gas production taxes 927 3,341 1,799 5,770 Oil and natural gas production expenses 9,119 9,458 19,204 18,780 Depreciation and amortization 7,560 11,179 16,504 21,802 Accretion expense 532 540 936 1,078 Impairment - - 58,929 - Share-based compensation 552 932 1,093 1,479 General and administrative, overhead and other expenses, net of operator's overhead fees   3,745     5,539     8,090     11,056   Total operating expenses   22,435     30,989     106,555     59,965   Operating loss (12,016 ) (14,344 ) (70,124 ) (7,270 )   OTHER INCOME (EXPENSE): Interest expense (3,601 ) (6,197 ) (7,209 ) (14,359 ) Interest income 9 75 29 148 Other expense   (106 )   (205 )   (539 )   (354 ) LOSS BEFORE INCOME TAXES (15,714 ) (20,671 ) (77,843 ) (21,835 ) INCOME TAX BENEFIT   (3,908 )   (14,809 )   (27,944 )   (15,450 ) Net loss $ (11,806 ) $ (5,862 ) $ (49,899 ) $ (6,385 )   BASIC LOSS PER SHARE $ (0.16 ) $ (0.08 ) $ (0.66 ) $ (0.10 ) BASIC WEIGHTED AVERAGE SHARES OUTSTANDING   74,696,028     69,198,767     75,986,262     64,190,725     DILUTED LOSS PER SHARE $ (0.16 ) $ (0.08 ) $ (0.66 ) $ (0.10 ) DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING   74,696,028     69,198,767     75,986,262     64,190,725           TABLE 3 RAM Energy Resources, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited)   Six months ended June 30, 2009 2008 OPERATING ACTIVITIES: Net loss $ (49,899 ) $ (6,385 ) Adjustments to reconcile net loss to net cash provided by operating activities- Depreciation and amortization 16,504 21,802 Amortization of deferred loan costs and Senior Notes discount 641 602 Accretion expense 936 1,078 Impairment 58,929 - Unrealized loss on derivatives and premium amortization 25,633 39,067 Deferred income tax benefit (28,007 ) (15,490 ) Share-based compensation 1,093 1,479 Loss on disposal of other property, equipment and subsidiary 96 174 Other expense 448 174 Changes in operating assets and liabilities Accounts receivable 444 (8,366 ) Prepaid expenses and other assets 144 (405 ) Derivative premiums (1,414 ) - Accounts payable and proceeds due others (6,200 ) 11,250 Accrued liabilities and other (18,046 ) (2,843 ) Restricted cash 16,000 - Income taxes payable (207 ) (237 ) Asset retirement obligations   (181 )   (309 ) Total adjustments   66,813     47,976   Net cash provided by operating activities 16,914 41,591 INVESTING ACTIVITIES: Payments for oil and natural gas properties and equipment (17,746 ) (37,434 ) Proceeds from sales of oil and natural gas properties 213 295 Payments for other property and equipment (363 ) (504 ) Proceeds from sales of other property and equipment 433 19 Proceeds from sale of subsidiary, net of cash - 308 Payments of merger costs   -     35   Net cash used in investing activities   (17,463 )   (37,281 ) FINANCING ACTIVITIES: Payments on long-term debt (13,081 ) (134,924 ) Proceeds from borrowings on long-term debt 18,000 54,226 Payments for deferred loan costs (2,324 ) (30 ) Stock repurchased (6 ) (70 ) Warrants exercised   -     86,614   Net cash provided by financing activities   2,589     5,816   INCREASE IN CASH AND CASH EQUIVALENTS 2,040 10,126 CASH AND CASH EQUIVALENTS, beginning of period   164     6,873   CASH AND CASH EQUIVALENTS, end of period $ 2,204   $ 16,999   SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for income taxes $ 270   $ 277   Cash paid for interest $ 6,788   $ 16,335   DISCLOSURE OF NON CASH INVESTING AND FINANCING ACTIVITIES: Asset retirement obligations $ 984   $ 516   Payment-in-kind interest $ 43   $ -                          

TABLE 4

RAM Energy Resources, Inc.

Production by Area

    Mature Mature Developing Fields Oil Fields* Natural Gas Fields   Three Months Ended June 30, 2009 South Texas   Barnett Shale   Appalachia Various Various Total Aggregate Net Production Oil (MBbls) 14 2 1 242 31 290 NGLs (MBbls) 28 27 - 22 19 96 Natural Gas (MMcf) 502   171   22 277 631 1,603 MBoe 125   57   4 310 156 652   Three Months Ended June 30, 2008 Aggregate Net Production Oil (MBbls) 11 1 - 237 51 300 NGLs (MBbls) 32 14 - 22 18 86 Natural Gas (MMcf) 704   78   5 187 570 1,544 MBoe 161   27   1 290 165 644   Change in MBoe (36) 30 3 20 (9) 8 Percentage Change in MBoe -22.4% 111.1% 300.0% 6.9% -5.5% 1.2%   *Includes Electra/Burkburnett, Allen/Fitts and Layton Fields             TABLE 5 RAM Energy Resources, Inc. Production and Prices Summary   Three Months Ended Six Months Ended June 30       June 30 2009 2009   Production volumes: Oil (MBbls) 290 580 NGLs (MBbls) 96 199 Natural gas (MMcf) 1,603 3,170

Total (MBoe)

652 1,308   Average sale prices received: Oil (per Bbl) $ 55.98 $ 47.35 NGLs (per Bbl) $ 24.96 $ 20.74 Natural gas (per Mcf) $ 3.06 $ 3.46 Total per Boe $ 36.03 $ 32.54   Cash effect of derivative contracts: Oil (per Bbl) $ 6.19 $ 10.59 NGLs (per Bbl) $ - $ - Natural gas (per Mcf) $ 5.54 $ 3.91 Total per Boe $ 16.37 $ 14.18   Average prices computed after cash effect of settlement of derivative contracts: Oil (per Bbl) $ 62.17 $ 57.94 NGLs (per Bbl) $ 24.96 $ 20.74 Natural gas (per Mcf) $ 8.60 $ 7.37 Total per Boe $ 52.40 $ 46.72   Cash expenses (per Boe): Oil and natural gas production taxes $ 1.42 $ 1.38 Oil and natural gas production expenses $ 13.99 $ 14.68 General and administrative $ 5.74 $ 6.19 Cash interest $ 5.12 $ 5.19 Cash taxes $ 0.19 $ 0.21 Total per Boe $ 26.46 $ 27.65   Cash flow per Boe $ 25.94 $ 19.07  

Table 6

RAM Energy Resources, Inc.

EBITDA, Free Cash Flow and Adjusted Net Income

(non-GAAP measures)

(unaudited)

 

Non-GAAP Financial Measures

EBITDA, a non-GAAP measure, is determined by adding the following to net income (loss): interest expense, capitalized PIK interest, amortized deferred loan costs, income taxes, depreciation, amortization, accretion, share based compensation, impairment charges, unrealized gains or losses on derivatives and MTM settlement charges. Free cash flow is also a non-GAAP measure representing EBITDA after adjustments for the cash portion of interest and income taxes. Adjusted net income is a non-GAAP measure which excludes the income tax affected impact of unrealized derivative gains or losses, MTM settlement charges and impairment charges on GAAP income. These non-GAAP measures are 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). These non-GAAP measures are widely accepted as financial indicators of an oil and gas company’s ability to generate cash used to internally fund exploration and development activities and fund debt service costs. These non-GAAP measures are 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.                             Qtr Ended Qtr Ended 6 Mos Ended 6 Mos Ended 6/30/2009 6/30/2008 6/30/2009 6/30/2008 ( $000s, except per share amounts ) EBITDA: Net income (loss) $ (11,806 ) $ (5,862 ) $ (49,899 ) $ (6,385 ) Plus: Interest expense $ 3,259 $ 5,902 $ 6,568 $ 14,060 Plus: PIK interest $ 43 $ - $ 43 $ - Plus: Amortization of deferred loan costs $ 299 $ 295 $ 598 $ 299 Plus: Amortization and depreciation & accretion $ 8,092 $ 11,719 $ 17,440 $ 22,880 Plus: Share-based compensation $ 552 $ 932 $ 1,093 $ 1,479 Plus: Income tax benefit $ (3,908 ) $ (14,809 ) $ (27,944 ) $ (15,450 ) Plus: Impairment charges $ - $ - $ 58,929 $ - Less: Unrealized (gain) loss on derivatives $ 23,795 $ 33,808 $ 24,802 $ 39,067 Plus: Settlement transaction charge $ - $ - $ 448 $ -                             EBITDA $ 20,326 $ 31,985 $ 32,078 $ 55,950   Less:   Cash paid for interest $ 3,338 $ 6,869 $ 6,788 $ 16,335 Cash paid for income tax $ 121 $ 277 $ 270 $ 277                             Free cash flow $ 16,867         $ 24,839         $ 25,020         $ 39,338     Weighted average shares outstanding - basic 74,696 69,199 75,986 64,191 Weighted average shares outstanding - diluted 74,838 69,509 76,157 64,431   Cash flow per share - basic $ 0.23 $ 0.36 $ 0.33 $ 0.61 Cash flow per share - diluted $ 0.23 $ 0.36 $ 0.33 $ 0.61     Adjusted net income (loss): Net income (loss) $ (11,806 ) $ (5,862 ) $ (49,899 ) $ (6,385 )   Plus: Tax effected impairment charge $ - - $ 37,535 -   Plus: Tax effected settlement charge $ - - $ 278 -   Plus: Tax effected unrealized (gain) loss on derivatives $ 14,753         $ 20,623         $ 15,377         $ 24,222     Adjusted net income (loss) $ 2,947         $ 14,761         $ 3,291         $ 17,837     Weighted average shares outstanding - basic 74,696 69,199 75,986 64,191 Weighted average shares outstanding - diluted 74,838 69,509 76,157 64,431   Adjusted net income (loss) per share - basic $ 0.04 $ 0.21 $ 0.04 $ 0.28 Adjusted net income (loss) per share - diluted $ 0.04 $ 0.21 $ 0.04 $ 0.28