SOURCE: Rancher Energy

November 14, 2008 07:00 ET

Rancher Energy Corp. Announces Second Quarter Fiscal 2009 Financial Results

DENVER, CO--(Marketwire - November 14, 2008) - Rancher Energy Corp. (OTCBB: RNCH) today announced financial results for its second fiscal quarter ended September 30, 2008.

Second Quarter Summary

The Company reported a 100% increase in second quarter revenue, to $3.3 million from $1.7 million in the same quarter last year. Total revenue included oil & gas sales of $2.0 million, up from $1.7 million in the same quarter last year, and gains on derivative activities of $1.3 million. The Company had no derivative contracts in place for the second quarter of 2007. The increased oil & gas sales revenue was due to a higher average sales price of $109.79 per barrel in the second quarter versus $69.88 per barrel in the second quarter a year ago. Rancher Energy sold 18,179 barrels of oil -- its net interest -- in the second quarter, down from 23,622 barrels a year ago due to mechanical-related downtime on certain producing wells as well as normal, year-over-year production declines.

The Company recorded a $6.8 million, non-cash impairment charge in the second quarter, reflecting excess carrying costs of certain properties over the anticipated future realized value. With the exception of production taxes, which increased 21% to $243,000 in the second quarter, the Company reduced costs in all other expense categories. In particular, general and administrative expense declined by 37% to $960,000 from $1.5 million, reflecting year-over-year reductions in headcount, professional fees and other overhead expenses. Due to the $6.8 million, non-cash impairment, total operating expenses in the second quarter increased to $8.9 million from $2.9 million a year ago.

Other expense in the second quarter totaled $1.7 million versus $1.4 million in the corresponding quarter a year ago. Other expense primarily included amortization of deferred financing costs and interest expense on the GasRock note payable, which due date has been extended to April 30, 2009. Net loss for the second quarter, which included the $6.8 million, non-cash impairment charge, was $7.3 million, or $0.06 per basic and diluted share, versus a net loss of $2.6 million, or $0.02 per basic and diluted share, in the same quarter last year.

Rancher Energy closed the second quarter with cash and cash equivalents of $5.1 million versus $6.8 million at March 31, 2008, fiscal year end.

Six-Month Summary

Total revenue through six months ended September 30, 2008, increased to nearly $3.3 million from $3.0 million in the same period last year. Oil & gas sales of $3.9 million were partially offset by a $590,000 loss related to hedging activities required by the GasRock loan. Through six months the Company sold 34,262 barrels of oil at an average price of $113.68 versus 46,056 barrels of oil sold at an average price of $64.73 per barrel in the same period last year. Again, the decline in production was attributed to mechanical problems at certain producing wells.

Total operating expenses increased to $11.1 million from $6.6 million due to the $6.8 million, non-cash impairment charge incurred in the second quarter. Excluding the $6.8 million impairment charge, total operating expenses declined by $2.3 million, reflecting decreases in all expense categories except production taxes, which increased to $474,000 from $363,000 in the same period last year based on higher oil & gas sales revenue. General and administrative expense declined by more than 50% to $2.0 million from $4.1 million as the Company aggressively cut overhead expenses.

Total other expense in the six-month period was $3.4 million, up from $2.8 million in the same period last year. Interest expense increased to $747,000 from $113,000 in association with the GasRock note payable. The Company also incurred a $2.7 million charge for amortization of deferred financing costs and discount on note payable in the six-month period, up from $99,000 in the year-ago period. Conversely, in the year-ago six-month period the Company had $2.6 million in liquidated damages pursuant to a registration rights arrangement versus no expense in that category in the 2008 period. Net loss for the six-month period, including the $6.8 million impairment, was $11.2 million, or $0.10 per basic and diluted share, as compared with $6.4 million, or $0.06 per basic and diluted share, in the same period last year.

About Rancher Energy Corp.

Rancher Energy is an innovative oil & gas exploration & development company with a targeted strategy to reinvigorate older, historically productive oil fields in the hydrocarbon-rich Rocky Mountain region of the United States. Using waterflood injection and CO2 flooding, coupled with other leading edge hydrocarbon recovery techniques such as 3-D seismic data and directional drilling, Rancher Energy plans to extract proven in-place oil that remains behind in mature fields. Rising energy demand combined with advances in oil recovery have made this strategy profitable. Rancher Energy is taking advantage of this convergence by acquiring low risk, high quality, historically productive plays with under-exploited reserves and developing customized enhanced recovery strategies to maximize production.

Forward-Looking Statements

This press release includes forward-looking statements as determined by the U.S. Securities and Exchange Commission (the "SEC"). All statements, other than statements of historical facts, included in this press release that address activities, events, or developments that the Company believes or anticipates will or may occur in the future are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include the Company's ability to obtain financing to implement its plan, to construct pipeline and other infrastructure, and for other operational and working capital purposes, the uncertainty of recovery factors for the enhanced oil recovery projects, the volatility of oil prices, general economic and business conditions, and other factors over which the Company has little or no control. The Company does not intend (and is not obligated) to update publicly any forward-looking statements. The contents of this press release should be considered in conjunction with the warnings and cautionary statements contained in the Company's recent filings with the SEC.

Rancher Energy Corp.
Consolidated Statements of Operations
(unaudited)

                        Three months ended           Six months ended
                           September 30,               September 30,
                        2008          2007          2008          2007
                    ------------  ------------  ------------  ------------

Revenues:
  Oil & gas sales   $  1,995,901  $  1,650,628  $  3,894,869  $  2,981,107
  Gain (loss) on
   derivative
   activities, net     1,305,551             -      (589,743)            -
                    ------------  ------------  ------------  ------------
     Total revenues    3,301,452     1,650,628     3,305,126     2,981,107
Operating expenses:
  Production taxes       243,366       201,182       473,649       362,651
  Lease operating
   expenses              549,441       691,429     1,172,863     1,279,661
  Depreciation,
   depletion and
   amortization          301,708       368,724       577,549       700,256
  Accretion expense       30,835        31,618        77,111        77,608
  Impairment of
   unproved
   properties          6,800,000             -     6,800,000             -
  Exploration expense          -        89,668         9,602       130,829
  General and
   administrative
   expense               959,777     1,513,100     2,008,154     4,053,091
                    ------------  ------------  ------------  ------------
     Total operating
      expenses         8,885,127     2,895,721    11,118,928     6,604,096
                    ------------  ------------  ------------  ------------
Loss from operations  (5,583,675)   (1,245,093)   (7,813,802)   (3,622,989)
                    ------------  ------------  ------------  ------------
Other income (expense):
  Liquidated damages
   pursuant to
   registration rights
   arrangement                 -    (1,268,283)            -    (2,645,393)
  Amortization of
   deferred financing
   costs and discount
   on note payable    (1,366,527)      (99,254)   (2,675,702)      (99,254)
  Interest expense      (375,399)      (41,941)     (746,694)     (113,180)
  Interest and other
   income                  8,737        25,541        19,318        73,865
                    ------------  ------------  ------------  ------------
     Total other
      expense         (1,733,189)   (1,383,937)   (3,403,078)   (2,783,962)
                    ------------  ------------  ------------  ------------
Net loss            $ (7,316,864) $ (2,629,030) $(11,216,880) $ (6,406,951)
                    ============  ============  ============  ============
Basic and diluted
 net loss per share $      (0.06) $      (0.02) $      (0.10) $      (0.06)
                    ============  ============  ============  ============
Basic and diluted
 weighted average
 shares outstanding  115,457,475   108,018,888   115,213,149   105,888,646



Rancher Energy Corp.
Consolidated Balance Sheets
(Unaudited)
                                              September 30,    March 31,
                                                  2008           2008
ASSETS                                        ------------   ------------
Current Assets:
  Cash and cash equivalents                   $  5,141,371   $  6,842,365
  Accounts receivable and prepaid expenses       1,000,029      1,170,641
                                              ------------   ------------
     Total current assets                        6,141,400      8,013,006

Oil & gas properties, at cost
 (successful efforts method):
  Unproved                                      54,054,852     54,058,073
  Proved                                        20,920,412     20,734,143
  Less: Accumulated depletion, depreciation,
   amortization and impairment                  (8,810,672)    (1,531,619)
                                              ------------   ------------
     Net oil & gas properties                   66,164,592     73,260,597

Other assets:
  Furniture and equipment, net of accumulated
   depreciation of $288,107 and $204,420,
   respectively                                    863,643        997,196
  Other assets                                     903,630      1,300,382
                                              ------------   ------------
     Total other assets                          1,767,273      2,297,578
                                              ------------   ------------
     Total assets                             $ 74,073,265   $ 83,571,181
                                              ============   ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued liabilities    $  1,229,472   $  2,114,204
  Accrued oil & gas property costs                 250,000        250,000
  Asset retirement obligation                      360,638        337,685
  Note payable, net of unamortized discount
   of $366,123 and $2,527,550, respectively     11,873,877      9,712,450
  Derivative liability                             713,063        590,480
                                              ------------   ------------
     Total current liabilities                  14,427,050     13,004,819

Long-term liabilities:
  Derivative liability                              55,158        246,553
  Asset retirement obligation                      974,311        922,166
                                              ------------   ------------
     Total long-term liabilities                 1,029,469      1,168,719

Commitments and contingencies:                           -              -

Stockholders' equity:
  Common stock                                       1,162          1,150
  Additional paid-in capital                    92,226,152     91,790,181
  Accumulated deficit                          (33,610,568)   (22,393,688)
                                              ------------   ------------
     Total stockholders' equity                 58,616,746     69,397,643
                                              ------------   ------------
  Total liabilities and stockholders' equity  $ 74,073,265   $ 83,571,181
                                              ============   ============

Contact Information

  • Contacts:

    John Works
    Chief Executive Officer
    Rancher Energy Corp.
    303-629-1125

    Jay Pfeiffer
    Pfeiffer High Investor Relations, Inc.
    303-393-7044