SOURCE: ReoStar Energy Corporations

November 15, 2007 14:16 ET

ReoStar Energy Corp. Announces Second Quarter 2008 Financial Results

FORT WORTH, TX--(Marketwire - November 15, 2007) - ReoStar Energy Corp. (OTCBB: REOS) today announced financial results for the second quarter fiscal year 2008, which ended September 30, 2007.

Second Quarter Financial Summary

For the three months ended September 30, 2007 oil and gas production was 21,642 barrels of oil equivalent ("BOE"), an 18.4% increase when compared with 18,286 BOE for the previous quarter. The average price received for natural gas sold during the quarter was $5.45 per MCF net of transportation, compression and CO2 charges, compared with $5.95 per MCF for the previous quarter. The average price received per barrel of oil was $71.50 compared with $62.00 per barrel during the previous quarter. For the three months ended September 30, 2007, ReoStar reported revenues from oil and gas production of $1,019,222, an increase of 25%, compared to $813,924 in the prior quarter ending June 30, 2007.

Total Operating Expenses for the second quarter 2008 were approximately $1.2 million compared to $780,832 for the first quarter ended March 31, 2007. The increase in total operating expenses was the result of an increase in additional lease expenditures and general and administrative expenses primarily due to the costs related to listing the company and expenses related to implementing our EOR pilot in Corsicana.

Operating income for the second quarter 2008 was $39,914 compared to a operating loss of ($348,957) for the quarter ended June 30, 2007.

As of September 30, 2007, REOS had $3.6 million in cash and total assets of approximately $20 million.

Shareholders equity for the period ending September 30, 2007 was approximately $9.3 million compared to $8.9 million for the period ending June 30, 2007.

Mark Zouvas, CEO of ReoStar, commented, "We are pleased with the results of our operations, the improvements in production are a result of the transition to our fourth chapter of development in the Barnett Shale oil window. Based on the positive response we are seeing in Corsicana, we have begun the expansion of our SP pilot program which will add 13 wells to the current flood. We expect to have these wells drilled during the first quarter of the coming calendar year and plan to expand our current pilot program to include these wells. Our acquisition strategies remain focused on development and redevelopment properties that create bolt-on growth for our core businesses."

About ReoStar Energy Corporation

ReoStar Energy Corporation (OTCBB: REOS), headquartered in Fort Worth, Texas, is a 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 over 17,000 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 Balance Sheet
                            September 30, 2007
                              (unaudited)

ASSETS
Current Assets:
  Cash                                                      $    3,571,920
  Accounts Receivable:
    Oil and Gas                                                    637,299
    Lease Sales                                                    737,913
    Related Party                                                  403,111
                                                            --------------
  Total Current Assets                                           5,350,243
                                                            --------------

Note Receivable                                                  1,465,424

Oil and Gas Properties - successful efforts method              14,816,930
  Less Accumulated Depletion and Depreciation                   (3,327,272)
                                                            --------------
    Oil and Gas Properties (net)                                11,489,658
                                                            --------------

Other Depreciable Assets:                                        1,372,717
  Less Accumulated Depreciation                                    (31,147)
                                                            --------------
    Other Depreciable Assets (net)                               1,341,570
                                                            --------------
Total Assets                                                $   19,646,895
                                                            ==============

LIABILITIES
Current Liabilities:
  Accounts Payable                                          $    1,002,267
  Payable to Related Parties                                       250,750
  Royalties Payable                                                 13,834
  Accrued Expenses                                               1,037,870
  Current Portion of Long-Term Debt                              3,194,594
                                                            --------------
    Total Current Liabilities                                    5,499,315
                                                            --------------

  Notes Payable                                                  1,646,334
  Notes Payable - Related Parties                                3,618,924
  Less Current Portion of Notes Payable                         (3,194,594)
                                                            --------------
    Total Long-Term Debt                                         2,070,664
                                                            --------------

  Deferred Tax Liability                                         2,454,476
                                                            --------------
    Total Liabilities                                           10,024,455
                                                            --------------

  Commitments and Contingencies:                                         -
    Contingent Stock Based Compensation                            309,451

Stockholders' Equity
  Common Stock, $.001 par, 200,000,000 shares
   authorized 79,831,310 and shares outstanding
   on September 30, 2007                                            79,831
  Additional Paid-In-Capital                                     9,147,072
  Retained Earnings                                                 86,086
                                                            --------------
    Total Stockholders' Equity                                   9,312,989
                                                            --------------
    Total Liabilities and Stockholders' Equity              $   19,646,895
                                                            ==============



                      ReoStar Energy Corporation
                 Consolidated Statements of Operations

                                                     Six        Twelve
                                                    Months      Months
                          Three Months Ended        Ended       Ended
                       ------------------------- ------------ ------------
                        Sept. 30,     June 30,    Sept. 30,   December 31,
                          2007          2007         2007         2006
                       (unaudited)   (unaudited)  (unaudited)  (audited)
                       ------------ ------------ ------------ ------------
Revenues
  Oil and Gas Sales    $  1,019,222 $    813,924 $  1,833,146 $  2,874,291
  Sale of Leases            307,028            -      307,028      400,378
  Other Income               79,367           65       79,432       45,771
                       ------------ ------------ ------------ ------------
    Total Revenue         1,405,617      813,989    2,219,606    3,320,440
                       ------------ ------------ ------------ ------------

Costs and Expenses
  Oil & Gas Lease
   Operating Expenses       491,703      333,521      825,224    1,131,502
  Severance and Ad
   Valorem Taxes             59,947       48,936      108,883      163,523
  Delay Rentals               8,571       43,615       52,186            -
  Depletion &
   Depreciation             332,245      286,131      618,376    1,856,365
  General &
   Administrative:                -            -            -      281,727
    Salaries and Benefits   249,533      233,479      483,012            -
    Legal & Professional    121,953      157,849      279,802            -
    Other General &
     Administrative         101,751       59,415      161,166            -
  Interest, net of
   capitalized interest
   of $126,676 and
   $141,012 for the
   periods ended
   9/30/2007 and
   6/30/2007,
   respectively                   -            -            -       13,660
                       ------------ ------------ ------------ ------------
    Total Costs and
     Expenses             1,365,703    1,162,946    2,528,649    3,446,777
                       ------------ ------------ ------------ ------------

Income from continuing
 operations before
 income taxes                39,914     (348,957)    (309,043)    (126,337)

Income from
 discontinued
 operations:
  Pipeline Income                 -       35,277       35,277      319,093
  Gain on Sale of
   Pipeline                  (7,952)   2,244,349    2,236,397            -
                       ------------ ------------ ------------ ------------
  Income from
   discontinued
   operations                (7,952)   2,279,626    2,271,674      319,093
                       ------------ ------------ ------------ ------------

Interest Income              70,930       23,332       94,262            -
Income Tax Provision        (36,013)    (683,900)    (719,913)           -
                       ------------ ------------ ------------ ------------
Net (Loss) Income      $     66,879 $  1,270,101 $  1,336,980 $    192,756
                       ============ ============ ============ ============


Basic and Diluted Loss
 per Common Share      $       0.00 $       0.02 $       0.02
                       ------------ ------------ ------------
Weighted Average
 Common Shares
 Outstanding             79,711,310   76,524,026   77,907,148
                       ============ ============ ============


Pro-Forma Earnings Per
 Share
  Net Income                                                  $    192,756
  Proforma Income Tax
   Expense at Statutory
   Rate (35%)                                                      (67,465)
                                                              ------------
  Proforma Net Income                                         $    125,291
                                                              ============

Proforma Weighted
 Average Shares
 Outstanding                                                    68,129,310
                                                              ------------

Proforma Basic and
 Diluted Earnings Per
 Share                                                        $       0.00
                                                              ============

Contact Information

  • Company Contacts:
    ReoStar Energy Corporation
    Mark Zouvas
    CEO
    817.989.7367

    For investors
    Mark McPartland
    817.350.4760