RAM Energy Resources Announces 2011 Capital Budget, Planned Targets and Update to Osage Drilling Plans
03 Fevereiro 2011 - 12:00PM
Business Wire
RAM Energy Resources, Inc. (Nasdaq: RAME) today announced its
preliminary 2011 non-acquisition capital budget totaling $35
million. Consistent with RAM’s historical strategy, non-acquisition
capital expenditures are targeted to be within estimated annual
cash flow. Key assumptions supporting the 2011 capital expenditure
budget are:
a. Hydrocarbon prices equal to the calendar 2011
NYMEX strip prices prevailing at year-end 2010 of $93.68 per barrel
for oil and $4.64 per Mcf for natural gas; b. Estimated production
mix of 66% oil and natural gas liquids (NGLs) and 34% natural gas;
c. Estimated production of 1.7 – 1.8 million barrel of oil
equivalents (BOE), principally reflecting the absence for the
entire 2011 year the volumes associated with two asset sales which
closed in December 2010. First quarter 2011 production forecast in
the range of 400 – 420 thousand BOE, anticipates some winter
weather interruption similar to last year based on weather patterns
to date, but volumes are expected to increase in following quarters
coincident with capital expenditures; d. Production and pricing
assumptions combine to produce modified EBITDA (a non-GAAP measure)
within a range of $52 - $55 million; e. Interest expense within a
range of $14 - $15 million, approximately 36% lower than the
preliminary estimate of interest expense incurred in 2010.
Approximately $18 million or 51% of the 2011 budget targets
development and exploitation drilling along with recompletions from
the company’s mature and developing fields aimed at offsetting
natural declines and increasing production in the near term. An
additional $9 million, or 26%, is allocated to exploratory
activities for a total of $27 million, or 77%, of the budget
dedicated to replacing or growing production through the drillbit.
The remaining $8 million, or 23%, is allocated to capitalized
geological and geophysical expenditures (G&G), land and seismic
costs, with the objective of identifying new drilling opportunities
for 2011 and beyond. In 2011, RAM expects to attain similar
modified EBITDA and capital expenditure levels compared to those
experienced in 2010 as a result of a higher anticipated price for
oil and NGLs. These results are anticipated to occur despite the
forecast for lower production in 2011 compared to 2010, which is
principally a function of asset sales.
Balance Sheet and Liquidity Improvement with Asset
Sales
As a result of the application of sale proceeds from two
property sales in December 2010 and the resulting voluntary
prepayment on RAM’s term loan, the total amount outstanding under
RAM’s senior secured credit facility was reduced to $196.7 million
at December 31, 2010. The year-end 2010 bank debt is 20% lower than
the $245 million outstanding at the initiation of the company’s
mid-year strategic review process. The company has reduced debt by
a total of $139 million, or 41%, from the level of $336 million at
year-end 2007, coincident with the closing of its last major
acquisition. The borrowing base under RAM’s revolving credit
facility at year-end 2010, after adjusting for the collateral value
of the properties sold, was $145 million. Resulting liquidity of
$28.5 million represents an improvement of $11.5 million over the
company’s effective liquidity at June 30, 2010 and demonstrates
additional financial flexibility to fund future growth. A further
benefit from the asset sales and use of proceeds, RAM expects
interest expense in 2011 to drop by $7.5 to $8.5 million compared
to its preliminary estimate of interest expense in 2010.
“We are pleased to have executed two divestitures by year-end
2010, improving both our balance sheet and our liquidity compared
to those levels existing at the initiation of the company’s
strategic alternatives review in mid-2010. As a consequence of the
reduction of debt, the improvement in liquidity, our oily
production mix, the outlook for a continued high price for oil in
2011 and our sizable Osage exploration concession, we are well
positioned for growth in the coming year,” said Larry Lee, CEO of
RAM.
Advantaged Revenue Stream
In addition to an improved balance sheet and liquidity, RAM’s
mix of production also improved as a result of the property sales
in the fourth quarter and establishes a benchmark for the
production mix in 2011. The proportion of crude and NGLs as a
percent of total BOE produced rose to 66% in the month of December
2010 (exclusive of volumes attributable to assets sold) compared to
the level of 63% registered in the third quarter ended September,
30, 2010. Similarly, based on RAM’s preliminary estimate of proved
reserves at year-end 2010, oil and NGLs accounted for 62 percent of
total proved reserves.
Stepped up Pace of Drilling Planned in Osage Mississippian
Exploration Play
During 2010, the company drilled three wells on its 56,320 acre
concession in Osage County, Oklahoma, a part of the broad
Mississippian Chat / Lime / Arbuckle oil play in the region. During
the first quarter 2011, the company plans to drill a saltwater
disposal well, the Surber #3/ SWD, on concession acreage to service
existing and future producing wells. Also in the first quarter, RAM
is preparing to drill the Farmland #1, a well targeting the
Mississippi Chat formation. The Rickets #1, which was drilled to
the Mississippi Chat formation late in 2010 and the Surber #1 well
are both scheduled for additional testing, including fracturing and
stimulation in the first quarter 2011, coincident with the
availability of the completed salt water disposal well. Three
additional wells are scheduled to be drilled during the second
quarter of 2011. Four well locations have been identified for
drilling in the third quarter and three more wells are planned in
the fourth quarter of 2011 based on results of the second phase of
seismic acquisition. Interpretation of the first phase of 3-D,
acquired in 2010, indicated that as much as one-third of the
acreage surveyed could be prospective. In turn, this supported the
rationale to test a large part of the initial survey and ultimately
led to the diverse choice of locations for the initial wells
drilled in this play during 2010 and those planned for 2011.
Permitting is underway to acquire a second round of 3-D seismic and
the company has contracted with a vendor to begin acquisition
during the first quarter of 2011. This second phase of 3-D seismic
acquisition is planned to cover over 19,000 acres in the company’s
Osage concession and is anticipated to add additional drilling
prospects principally for 2012 and beyond when interpreted.
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
the company’s pursuit of strategic alternatives, assumed NYMEX
strip prices for oil and natural gas, anticipated capital spending,
planned drilling, targets for production, the company’s production
mix, modified EBITDA and interest as well as 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, issues
arising in conjunction with the debt refinancing process, 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.
About RAM Energy Resources
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 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.
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