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Arena Resources Announces Record Third Quarter and Nine-Month 2005 Financial and Operating Results

Posted on: Tuesday, 1 November 2005, 09:01 CST

215% Increase in Revenue for the Three Months to $7.9 Million;

317% Increase in Net Income for the Three Months to $3.46 Million

Arena Resources Inc. (AMEX: ARD) ("Arena")("company") announced today financial results for the third quarter and nine months ended Sept. 30, 2005. For the three-month period ended Sept. 30, 2005, Arena had oil and gas revenues of $7,937,785, compared to $2,516,970 for the quarter ended Sept. 30, 2004, a 215% increase. For the three-month period ended Sept. 30, 2005, the company had net income of $3,460,207, or $0.27 per diluted share, compared to net income of $830,049 or $0.09 per diluted share, for the same period in 2004, a 317% increase. For the nine-month period ended Sept. 30, 2005, the company reported oil and gas revenues of $16,481,074, compared to oil and gas revenues of $5,509,784 for the nine-month period ended Sept. 30, 2004, a 199% increase. Net income for the nine-month period ended Sept. 30, 2005 was $6,505,433, or $0.54 per diluted share, compared to net income of $1,688,239, or $0.20 per diluted share for the same period in 2004, a 285% increase.

The revenue increase was due to increases in production, primarily as a result of current development activity, property acquisitions in 2004 and increased average realized commodity sales prices. For the three months ended Sept. 30, 2005, oil sales volume increased to 123,600 barrels, compared to 54,769 barrels for the same period in 2004, a 126% increase. For the nine months ended Sept. 30, 2005, oil sales volume increased to 293,094 barrels, compared to 133,177 barrels for the same period in 2004, a 120% increase. For the three months ended Sept. 30, 2005, gas sales volume increased to 105,629 MCF (thousand cubic feet), compared to 52,698 MCF for the same period in 2004, a 100% increase. For the nine months ended Sept. 30, 2005, gas sales volume increased to 273,912 MCF, compared to 112,724 MCF for the same period in 2004, a 143% increase. The average commodity prices received by Arena were $58.92 per barrel of oil and $6.20 per MCF of natural gas for the quarter ended Sept. 30, 2005, compared to $41.13 per barrel of oil and $5.05 per MCF of natural gas for the quarter ended Sept. 30, 2004. The average prices received for the nine months ended Sept. 30, 2005 were $51.05 per barrel of oil and $5.55 per MCF of natural gas, compared to $37.47 per barrel of oil and $4.62 per MCF of natural gas for the nine-month period ended Sept. 30, 2004.

Total operating expenses for the three and nine months ended Sept. 30, 2005, were $2,421,596 and $5,969,133, respectively, as compared to $1,126,299 and $2,715,450 for the same periods ended Sept. 30, 2004. Depreciation, depletion and amortization costs for the three-month period ended Sept. 30, 2005, were $645,908 compared to $237,212 for the same period ended Sept. 30, 2004. For the nine-month period ended Sept. 30, 2005, depreciation, depletion and amortization totaled $1,550,791 compared to $553,038 for the same period ended Sept. 30, 2004. General and administrative costs for the three- and nine-month periods ended Sept. 30, 2005 were $259,978 and $803,082, respectively, compared to $131,619 and $473,391 for the same periods ended Sept. 30, 2004.

The company had no outstanding debt on its bank credit facility at Sept. 30, 2005 as compared to $5 million at June 30, 2005.

Net cash flow from operations for the nine months ended Sept. 30, 2005 was $11,873,191, or $0.98 per diluted share, compared to net cash flow of $3,224,551, or $0.39 per diluted share for the same period in 2004 (1).

Arena Chief Executive Officer Tim Rochford stated, "We are extremely proud of our record results for the third quarter during which production increased 32% over the second quarter 2005, revenues increased 71%, net income 100% and operating cash flow 87%. This quarter reflects the first full quarter of our development drilling and re-stimulation operations on our Fuhrman-Mascho property. During the quarter we drilled 12 new wells on this property and have had a 100% success rate on 25 wells completed to date since April. We will continue to focus on the development of our current properties, while at the same time pursue acquisition opportunities that complement our existing locations."

(1) Cash Flow from Operations is a non-GAAP financial measure that represents "Net Cash Provided By Operating Activities" adjusted for the change in operating assets and liabilities. See below for a reconciliation of the related amounts.

About Arena Resources Inc.

Arena Resources Inc. is an oil and gas exploration, development and production company with current operations in Texas, Oklahoma, Kansas and New Mexico.

This release contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 that involve a wide variety of risks and uncertainties, including, without limitations, statements with respect to the company's strategy and prospects. Readers and investors are cautioned that the company's actual results may differ materially from those described in the forward-looking statements due to a number of factors, including, but not limited to, the company's ability to acquire productive oil and/or gas properties or to successfully drill and complete oil and/or gas wells on such properties, general economic conditions both domestically and abroad, and the conduct of business by the company, and other factors that may be more fully described in additional documents set forth by the company.

CONDENSED STATEMENTS OF OPERATIONS Three Months Ended Nine Months Ended Sept. 30, Sept. 30, ------------------ ----------------- 2005 2004 2005 2004 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Oil and Gas Revenues $7,937,785 $2,516,970 $16,481,074 $5,509,784 ---------- ---------- ----------- ---------- Costs and Operating Expenses Oil and gas production costs 946,380 564,933 2,384,816 1,284,753 Oil and gas production taxes 569,330 192,535 1,230,444 404,268 Depreciation, depletion and amortization 645,908 237,212 1,550,791 553,038 General and adminis- trative expense 259,978 131,619 803,082 473,391 ---------- ---------- ----------- ---------- Total Costs and Operating Expenses 2,421,596 1,126,299 5,969,133 2,715,450 ---------- ---------- ----------- ---------- Other Income (Expense) Gain from change in fair value of put options 20,627 -- 86,497 2,905 Accretion expense (25,158) (13,007) (74,484) (38,072) Interest expense (19,266) (60,296) (189,541) (128,407) ---------- ---------- ----------- ---------- Net Other Expense (23,797) (73,303) (177,528) (163,574) ---------- ---------- ----------- ---------- Provision for Deferred Income Taxes (2,032,185) (487,319) (3,828,980) (942,521) ---------- ---------- ----------- ---------- Net Income $3,460,207 $ 830,049 $6,505,433 $1,688,239 ========== ========== ========== ========== Basic Net Income Per Common Share $ 0.30 $ 0.10 $ 0.62 $ 0.23 Diluted Net Income Per Common Share $ 0.27 $ 0.09 $ 0.54 $ 0.20 Basic Weighted-Average Common Shares Outstanding 11,491,994 8,164,434 10,554,879 7,500,852 Diluted Weighted- Average Common Shares Outstanding 12,982,252 8,880,284 12,061,207 8,301,838 COMPARATIVE OPERATING STATISTICS (Unaudited) Three Months Ended ------------------ 9/30/05 9/30/04 Change --------------------------------- Net Production - BOE per day 1,535 691 +122% Per BOE: Average Sales Price $56.22 $39.61 +42% Operating Costs 10.73 11.92 -10% DD&A 4.52 3.74 +21% General & Administrative Expenses 1.84 2.07 -11% Interest Expense .14 .95 -85% (Unaudited) Nine Months Ended ----------------- 9/30/05 9/30/04 Change --------------------------------- Net Production - BOE per day 1,241 556 +23% Per BOE: Average Sales Price $48.66 $36.26 +34% Operating Costs 10.68 11.11 -4% DD&A 4.52 3.64 +24% General & Administrative Expenses 2.37 3.12 -24% Interest Expense .56 .85 -34% CONDENSED BALANCE SHEET DATA Sept. 30, Dec. 31, 2005 2004 (Unaudited) (Audited) ----------- ----------- Assets Current assets $ 9,535,236 $ 2,498,423 Properties, buildings & equipment, net 50,722,636 32,943,884 Other assets & deposits 0 900,000 ----------- ----------- $60,257,872 $36,342,307 =========== =========== Liabilities & Shareholders' Equity Current Liabilities $ 1,618,739 $ 1,840,665 Deferred income taxes 5,885,332 2,129,993 Long-term debt 400,000 10,400,000 Other long-term liabilities 1,379,103 1,363,026 Shareholders' Equity 50,974,698 20,608,623 ----------- ----------- $60,257,872 $36,342,307 =========== =========== CONDENSED STATEMENTS OF CASH FLOWS Nine Months Ended Sept. 30, ----------------------- 2005 2004 (Unaudited) (Unaudited) Cash flows from operating activities: Net income $ 6,505,433 $ 1,688,239 Depreciation, depletion and amortization 1,550,791 553,038 Deferred income taxes 3,828,980 942,521 Other, net (12,013) 40,753 Net changes in operating assets and liabilities (2,015,112) 189,566 ----------- ----------- Net Cash Provided by Operating Activities 9,858,079 3,414,117 Net Cash Used in Investing Activities (18,063,288) (2,241,969) Net Cash Provided by (Used in) Financing Activities 13,522,477 (384,117) ----------- ----------- Net Increase in Cash 5,317,268 788,031 Cash at Beginning of Period 1,253,969 1,076,676 ----------- ----------- Cash at End of Period $ 6,571,237 $ 1,864,707 =========== =========== RECONCILIATION OF CASH FLOW FROM OPERATIONS Net cash provided by operating activities $ 9,858,079 $ 3,414,117 Change in operating assets and liabilities $ 2,015,112 $ (189,566) ----------- ----------- Cash flow from operations $11,873,191 $ 3,224,551 =========== =========== Management believes that the non-GAAP measure of cash flow from operations is useful information for investors because it is used internally and is accepted by the investment community as a means of measuring the company's ability to fund its capital program. It is also used by professional research analysts in providing investment recommendations pertaining to companies in the oil and gas exploration and production industry.

Source: Business Wire

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