ReoStar Energy Corp. (OTCBB: REOS) today announced results of
operations for the Fiscal Year (FY) ended March 31, 2009.
Highlights of the Fiscal Year 2009:
-- Secured a $25MM senior secured credit facility in October 2008
-- Twelve Months Oil and gas revenues increased 33% to $6.5 million
versus $4.9 million for the previous year ended March 31, 2008
-- Twelve Months oil and gas production increased 35% to 124,968 BOE
versus 92,193 BOE for the same period in the prior year
Mark Zouvas, CEO of ReoStar, stated, "We are pleased to have
achieved improvements in our oil and gas production over the
previous year, despite the challenging energy environment we faced.
The industry continues to undergo extraordinary changes as pricing
volatility has created a large number of insolvencies during the
last six months. Due to weak pricing, we have shifted our focus
from development drilling to improving operational efficiencies and
cost control by utilizing advanced technologies at down-market
costs to improve current production. Additionally, we are reviewing
distressed E&P opportunities for acquisition. Our Union Bank of
California credit facility has allowed us to withstand the
continued volatility in pricing and we expect to be in position to
seize growth opportunities that have historically followed industry
wide slowdowns."
Fiscal Year 2009 Results Summary
Oil and gas production for the year increased 35% to a total of
124,968 BOE compared with 92,193 BOE for the fiscal year ended
March 31, 2008. Oil and gas revenue for the year increased 33% to a
total of $6.5 million compared to $4.9 million for the fiscal year
ended March 31, 2008.
The Company had a net loss of $2.0 million for the fiscal year
compared to net income of $796,000 for the prior fiscal year. The
fiscal year 2009 net loss included non-cash net expenses totaling
$4.4 million.
During fiscal year ended March 31, 2009, the Company's cash
provided from operations was $825,000 and REOS invested $10 million
in capital expenditures. Financing activities provided net cash of
$9.0 million. The Company entered into a $25 million senior secured
credit facility with an initial borrowing base of $14 million. The
Company borrowed $9.8 million against the borrowing base during the
fiscal year ended March 31, 2009.
On March 31, 2009, REOS had $426,000 in cash and total assets of
$23.0 million. Debt consisted of payables to non-related parties of
$9.1 million, of which $9.0 million were long-term note payables.
REOS also had accounts and notes payables to related parties of
$3.6 million.
Fiscal Year 2009 Operations Summary
-- Barnett Shale. ReoStar's main area of interest in the Barnett Shale
play is located in the "oil window" of the Barnett in southwest Cooke
County, Texas.
-- The Company completed, and began production in the seven wells that
were in process as of March 31, 2008. REOS also drilled, completed,
and began production in six wells. Two other wells were drilled
that are expected to be completed in the second quarter of fiscal
year 2010.
-- Corsicana Enhanced Oil Recovery (EOR) Project. ReoStar began injecting
surfactant polymer in phase I of the project in mid-June 2007 and has
continued injection throughout the current fiscal year. REOS initiated
phase II of the project by drilling 12 wells in June 2008 in an area
immediately south of the injection facility adjacent to the phase I
wells.
-- Corsicana deeper zone exploration. ReoStar drilled four deeper
exploratory wells in the Corsicana acreage. The first two, a Glen Rose
well and a Pecan Gap well were unsuccessful. In December 2008, the
company successfully completed two Pecan Gap wells.
Fiscal Year End 2009 Proven Reserves
At year-end 2009, the independent petroleum-consulting firm of
Forrest Garb and Associates, Inc. reviewed ReoStar's reserves.
These engineers reviewed 100% of the Company's proved reserves.
All estimates of oil and gas reserves are subject to
uncertainty. The following table sets forth the estimated proven
reserves in barrel of oil equivalents and the benchmark prices used
in projecting them (in thousands except prices):
Estimated Proved Reserves Corsicana E. Texas
Barnett Shale Field Field Total
------------- --------- -------- ------
Proved Developed (MBOE) 688 187 13 888
Proved Undeveloped (MBOE) 2,072 10,320 - 12,392
------------- --------- -------- ------
Total Proven Reserves at
March 31, 2009 2,760 10,507 13 13,280
============= ========= ======== ======
Benchmark Pricing
Natural Gas per mmbtu $ 3.58
Crude Oil per barrel $ 49.65
Plans for fiscal year 2010
Barnett Shale
In December 2008, ReoStar suspended its Barnett Shale
development due to the decline in commodity prices. The Company
expects to renew development once commodity prices have stabilized.
The Company has two drilling commitments and expects to drill one
cluster of six wells in order to fulfill those commitments in
fiscal 2010, contingent on some recovery in gas pricing. However,
regardless of commodity volatility, the Company will fulfill their
drilling commitments by year-end. The capital expenditure budget
assumes REOS will retain 100% working interests in the wells. The
Company expects to fund the drilling with the proceeds of a debt
facility and if appropriate, proceeds from the sale of working
interests in the referenced wells, which will reduce its interests
accordingly.
Corsicana
ReoStar has applied for an area wide injection permit, which
when granted will allow the Company to streamline the regulatory
permitting process. Upon approval, REOS expects to begin injection
in Phase II of the polymer flood. REOS expects to begin drilling
Phase III of the surfactant-polymer project in the fourth quarter
of the current fiscal year 2010.
REOS will drill three more Pecan Gap wells in July and August of
2009. If the wells are successful, the company expects to initiate
a Pecan Gap drilling program and will drill up to 5 wells per month
for the balance of the fiscal year. The Pecan Gap lies at about
1,800 feet and has proven to show favorable economics. REOS will,
at its discretion, sell up to 50% working interest in these wells
on a turn-key contract basis. As is our policy, we the Company will
refrain from granting more than one offset well to third-party
working interest owners, which enables us to have 100% working
interest in subsequent wells drilled.
Total capital expenditure budget for fiscal 2010 for the
Corsicana projects is $3.5 million. The budget will be funded
primarily with proceeds from the sale of up to 50% working interest
in the Pecan Gap wells, the credit facility, and cash flow from
current operations.
South Texas
During the first quarter of the fiscal year, REOS signed a
contract to acquire a 100% working interest (75% net revenue
interest) in 13,000 acres in South Texas. The acreage is in the
Edwards trend and contains both Edwards and Eagle Ford Shale
prospects. The technical team will remain in place once the
transaction is complete as they have significant experience in
South Texas and will be the operator of record for this area of
ReoStar's development. The team will provide the technical
expertise required to be successful in the Edwards and Eagle Ford
Shale plays.
"Our position for 2010 is very good as we have remained prudent
in managing our budgets and adjusting to the current economic
conditions. We have avoided entering into long-term contracts with
respect to our drilling operations and therefore have been able to
survive the dramatic downturn and avoid the problems now being
experienced by some of our industry peers. We have significant
infrastructure in place in our core areas, yet our fixed operating
costs are below industry averages. We continue to seek valuable
bolt-on acreage in our perspective target areas, but will remain
conservative with capital expenditures until we feel it is
appropriate to deploy our resources. We have a solid number of high
quality prospects in the Barnett Shale to drill and our expansion
in Corsicana is showing tremendous promise, especially with our
Pecan Gap drilling program. Our new opportunity in Eagle Ford Shale
could prove to be prescient for ReoStar, as we believe it will
provide significant gas and liquid production in anticipation of
rising gas prices. We are very excited by the prospects of our
company and we feel well positioned to capitalize on the
opportunities presented in this environment,'' concluded Mr.
Zouvas.
About ReoStar Energy Corporation
ReoStar Energy Corporation (OTCBB: REOS), headquartered in Fort
Worth, Texas, is an oil and gas company engaged in the acquisition,
development and production of natural gas and oil properties with
operations primarily focused on developmental resource plays and
enhanced oil recovery projects. The Company has vertically
integrated its assets to remove potential obstacles to growth,
which will enable it to develop and produce assets without the
risk, cost and time involved in traditional exploration.
The Company's strategy is to acquire an attractive portfolio of
oil reserves for a low cost, which have a high ratio of possible,
probable or proven undeveloped reserves. By converting these
undeveloped reserves into proved producing reserves, the Company
will continue to realize an increase in the overall value at low
risk and cost.
The Company's assets include approximately 20,000 gross (16,250
net) acres of mineral leasehold located in Texas (Barnett &
Corsicana) and Arkansas (Fayetteville). ReoStar's assemblage of
E&P assets allows for appreciable, unimpeded growth into the
foreseeable future.
Additional information is located on the company's website:
www.reostarenergy.com.
Certain statements in this news release may contain
forward-looking information within the meaning of Rule 175 under
the Securities Act of 1933 and Rule 3b-6 under the Securities
Exchange Act of 1934, and are subject to the safe harbor created by
those rules. All statements, other than statements of fact,
included in this release, including, without limitation, statements
regarding potential future plans and objectives of the company, are
forward-looking statements that involve risks and uncertainties.
There can be no assurance that such statements will prove to be
accurate and actual results and future events could differ
materially from those anticipated in such statements. Technical
complications which may arise could prevent the prompt
implementation of any strategically significant plan(s) outlined
above.
ReoStar Energy Corporation
Consolidated Statements of Operations
Years Ended
---------------------------------
Mar. 31, 2009 Mar. 31, 2008
------------- -------------
Revenues
Oil & Gas Sales $ 6,558,069 $ 4,902,072
Sale of Leases 18,005 307,028
Other Income 458,365 281,231
------------- -------------
7,034,439 5,490,331
------------- -------------
Costs and Expenses
Oil & Gas Lease Operating Expenses 2,598,208 2,125,261
Workover Expenses 114,683 356,342
Severance & Ad Valorem Taxes 427,307 318,785
Geologic & Geophysical - 8,993
Delay Rentals 2,975 52,186
Plugging Costs & Expired Leases 433,976 290,959
Depletion & Depreciation 3,487,440 1,520,406
General & Administrative:
Salaries & Benefits 874,418 1,104,785
Legal & Professional 720,771 584,765
Other General & Administrative 701,687 332,009
Interest, net of capitalized interest
of $537,024 and $488,299 for the
years ended March 31, 2009 and
March 31, 2008, respectively 3,780 -
------------- -------------
9,365,245 6,694,491
------------- -------------
Other Income (Expense)
Interest Income 79,876 210,938
Other Expense (6,745) (16,938)
Loss on Equity Method Investments (206,561) (32,605)
------------- -------------
(Loss) from continuing operations
before income taxes and
discontinued operations (2,464,236) (1,042,765)
------------- -------------
Income Tax Benefit 460,402 364,930
------------- -------------
Loss before discontinued operations (2,003,834) (677,835)
Income from discontinued operations,
net of income taxes:
Pipeline Income - 22,930
Gain on Sale of Pipeline - 1,450,805
------------- -------------
Income from discontinued operations - 1,473,735
------------- -------------
Net Income (Loss) $ (2,003,834) $ 795,900
============= =============
Basic & Diluted (Loss) Income per
Common Share:
Loss from continuing operations $ (0.02) $ (0.01)
Income from discontinued
operations $ - $ 0.02
------------ -------------
Net Income (Loss) per Common
Share $ (0.02) $ 0.01
============ =============
Weighted Average Common
Shares Outstanding 80,300,804 78,800,618
============ =============
Contact: ReoStar Energy Corporation Teresa Wright
817-546-7718
ReoStar Energy (PK) (USOTC:REOS)
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