SOURCE: American Oil & Gas Inc.

American Oil & Gas Inc.

November 15, 2010 09:00 ET

American Oil & Gas Reports 3rd Quarter 2010 Financial Results and Provides Operations Update

DENVER, CO--(Marketwire - November 15, 2010) - Filed by: American Oil & Gas Inc. (NYSE Amex: AEZ)

Pursuant to Rule 425 under the Securities Act of 1933 and deemed filed pursuant to Rule 14a-12 of the Securities Exchange Act of 1934

Subject Company: American Oil & Gas Inc.

Commission File No.: 001-31900

American reports a net loss of $119,266 (nil per share, basic and diluted) for the quarter ended September 30, 2010, as compared to a net loss of $3,400,573 (loss of seven cents per share, basic and diluted) for the quarter ended September 30, 2009. For the nine-month periods ended September 30, 2010 and 2009, American reports net income to common stockholders of $27,661,320 (income of 46 cents per share, basic and 45 cents per share, diluted) and a net loss to common stockholders of $8,892,054 (loss of 18 cents per share, basic and diluted), respectively. The approximate $36.6 million increase in net income in the nine-month period includes a $36.4 million pre-tax gain on the sale of substantially all of American's oil and gas interests in the Powder River Basin in Wyoming on March 31, 2010.

During the quarter ended September 30, 2010, American sold 73,112 barrels of oil at $64.64 per barrel and 17,040 mcf of natural gas at $4.74 per mcf for total oil and gas revenues of $4,806,383. For the corresponding quarter ended September 30, 2009, American sold 4,877 barrels of oil at $59.17 per barrel and 49,949 mcf of natural gas at $3.48 per mcf for total oil and gas revenues of $462,553. Lease operating expenses, including production taxes, for the quarters ended September 30, 2010 and 2009 were $912,493 ($12.01 per BOE) and $278,429 ($21.09 per BOE), respectively. Depreciation, depletion and amortization expense of oil and gas properties was $1,601,000 ($21.08 per BOE) for the current quarter and $212,001 ($16.06 per BOE) for the corresponding prior year quarter.

During the nine-month period ended September 30, 2010, American sold 119,374 barrels of oil at $64.25 per barrel and 68,324 mcf of natural gas at $6.06 per mcf for total oil and gas revenues of $8,083,918. For the corresponding nine-month period ended September 30, 2009, American sold 14,056 barrels of oil at $46.87 per barrel and 183,386 mcf of natural gas at $3.42 per mcf for total oil and gas revenues of $1,285,705. Lease operating expenses, including production taxes, for the nine-month periods ended September 30, 2010 and 2009 were $1,777,764 ($13.60 per BOE) and $848,354 ($19.01 per BOE), respectively. Depreciation, depletion and amortization expense of oil and gas properties was $2,551,000 ($19.51 per BOE) for the current nine-month period and $546,000 ($12.24 per BOE) for the prior year nine-month period.

For the quarters ended September 30, 2010 and 2009, American's general and administrative expenses were $2,804,686 and $1,198,188, respectively. Total costs increased approximately $1.6 million primarily due to (i) approximately $1.0 million paid for a third party fairness opinion in July 2010 of the then-proposed merger with Hess Corporation and (ii) a $0.5 million increase in legal fees and expenses, primarily relating to the merger, including the defense of lawsuits filed in connection with the merger. For the nine-month periods ended September 30, 2010 and 2009, American's general and administrative expenses were $6,168,688 and $4,242,539 respectively. Total costs increased by $1.9 million, primarily due to (i) an approximately $1.1 million increase in investment banking and legal fees and expenses, primarily relating to the merger, including the defense of lawsuits filed in connection with the merger and (ii) an approximately $0.8 million increase in employee compensation.

At September 30, 2010, American had $17.9 million in working capital which includes $15.5 million in cash and short-term investments, total assets of $151.1 million, a long-term asset retirement obligation of $225,099, deferred income taxes of $6.2 million, no long term debt and stockholders' equity of $126.3 million. There are currently 61,029,656 common shares outstanding.

For the nine-month period ended September 30, 2010, American's net cash used by operating activities decreased by $361,956 (from $3,057,074 net cash used for operating activity for the nine-month period ended September 30, 2009 to $2,695,118 cash used by operations for the nine-month period ended September 30, 2010). Cash received from oil and gas revenues in the 2010 period were approximately $2 million greater than for the 2009 period. Cash expenditures for general and administrative expenses for the 2010 period were approximately $2 million greater than for the 2009 period. In the 2010 period, net purchases of well equipment inventory held in third party yards were approximately $315,000 less than in the 2009 period.

American used a net $24.9 million in cash during the nine-month period ended September 30, 2010 as compared with $7.2 million of cash used by investing activities in the nine-month period ended September 30, 2009. The $17.7 million increase in cash usage is primarily due to (i) a $63.8 million increase in acquisition, exploration and development of oil and gas properties (primarily in the Goliath Project), less (ii) $46.2 million received in March 2010 on the sale of oil and gas properties in the Powder River Basin in Wyoming.

During the nine-month periods ended September 30, 2010 and September 30, 2009, the only financing activities were $804,150 in cash received in the 2010 period relating to exercises of stock options and a warrant.

OPERATIONS UPDATE

American has operated or participated in the drilling of 22 gross (12.9 net) wells thus far in the Goliath project area in Williams County, North Dakota and is currently operating a four-rig drilling program. Including wells-in-progress, American has operated the drilling of a total of 16 gross (11.2 net wells) at Goliath, and six gross (1.7 net) wells have been drilled or are in progress by other operators. American operates and owns interests in five gross (3.05 net) currently producing wells.

The table below presents the current status of American's operated oil and natural gas drilling, completion and production operations:

WELL NAME                    LOCATION                    STATUS

Summerfield 15-15H           Sec. 15         Commenced production in May
     WI=35%                 T147N-R96W,      2010. IP rate of 2,799 barrels
    NRI=28.4%             Dunn County, ND    of oil equivalent ("BOE").
                                             Average daily rate for initial
                                             30, 60, 90, 120 and 150 days
                                             of 1,046, 812, 693, 608 and
                                             547 BOE, respectively.  Total
                                             cumulative production at
                                             10-31-2010 (167 actual
                                             production days) of 86,668 BOE
                                             (71,113 bbls of oil and 76
                                             mmcf of natural gas).

 Tong Trust 1-20H            Sec. 20         Commenced Production March
     WI=25.3%               T157N-R96W,      2010 at 1,421 BOE.  Average
    NRI=20.2%           Williams County, ND  daily rate for initial 30, 60,
                                             90, 120 and 150 days of 652,
                                             496, 401, 346 and 309 BOE,
                                             respectively.  Total
                                             cumulative production at
                                             11-5-2010 (173 actual
                                             production days) of 49,812 BOE
                                             (38,283 bbls of oil and 70
                                             mmcf of natural gas).

 Ron Viall 1-25H             Sec. 25         Commenced production May 2010.
     WI=94%                T156N-R98W        IP rate of 2,844 BOE. Average
    NRI=75.2%           Williams County, ND  daily rate for initial 30, 60,
                                             90 and 120 days of 987, 739,
                                             628 and 561 BOE, respectively.
                                             Total cumulative production
                                             at 11-5-2010 (144 actual
                                             production days) of 76,534 BOE
                                             (56,075 bbls of oil and 123
                                             mmcf of natural gas).

Bergstrom 15-23H             Sec. 23         Commenced production August
     WI=95%                 T156N-R98W       2010. IP rate of 3,049 BOE.
    NRI=76%             Williams County, ND  Average daily rate for initial
                                             30 and 60 days of 1,061 and
                                             860 BOE, respectively.  Total
                                             cumulative production at
                                             11-5-2010 (76 actual
                                             production days) of 58,875 BOE
                                             (45,861 bbls of oil and 78
                                             mmcf of natural gas).

  Johnson 15-35H             Sec. 35         Commenced production August
     WI=81.9%               T156N-R98W       2010. Due to North Dakota
    NRI=65.5%           Williams County, ND  Industrial Commission orders,
                                             production flow was choked
                                             back upon initial production
                                             due to excessive smoke from
                                             the flare.  Average daily rate
                                             for initial 30 and 60 days of
                                             806 and 711 BOE, respectively.
                                             Total cumulative production
                                             at 11-5-2010 (71 actual
                                             production days) of 47,348 BOE
                                             (36,188 bbls of oil and 67
                                             mmcf of natural gas).

   Hickel 15-35H             Sec. 35         Drilling operations concluded
      WI=62.3%             T157N-R97W        on July 27, 2010.  Completion
     NRI=49.8%          Williams County, ND  assembly installed to
                                             facilitate a 35-stage
                                             hydraulic fracture stimulation
                                             completion.  Remedial work is
                                             underway to prepare this well
                                             for frac as frac crews are
                                             scheduled to commence
                                             completion in mid-November
                                             2010.  If this well is not
                                             ready for completion, frac
                                             crews may move to complete the
                                             Hodenfield 15-7H well.

Hodenfield 15-33H            Sec. 33         Drilling operations concluded
     WI=57.4%               T157N-R97W       on August 5, 2010.  Completion
    NRI=45.9%           Williams County, ND  assembly installed to
                                             facilitate a 35-stage
                                             hydraulic fracture stimulation
                                             completion.  Fracture
                                             stimulation concluded on
                                             November 4, 2010.  Temporary
                                             plugs are expected to be
                                             drilled out before
                                             November 15, 2010 and the well
                                             should commence production in
                                             mid-November 2010.

Hodenfield 15-7H             Sec. 7          Drilling operations concluded
     WI=52.3%               T157N-R97W       on August 14, 2010.
    NRI=41.8%           Williams County, ND  Completion assembly installed
                                             to facilitate a 35-stage
                                             hydraulic fracture stimulation
                                             completion.  Crews are
                                             expected to commence
                                             completion operations on or
                                             about November 15, 2010 and
                                             the well is expected to be
                                             placed on production prior to
                                             the end of November 2010.

 Bergstrom 2-27H             Sec. 27         Drilling operations concluded
     WI=72.9%               T156N-R98W       on September 29, 2010.
    NRI=58.3%           Williams County, ND  Completion assembly installed
                                             to facilitate a 27-stage
                                             hydraulic fracture stimulation
                                             completion.  Crews are
                                             expected to commence
                                             completion operations
                                             immediately after completing
                                             the Hodenfield 15-7H well.

   Olson 15-36H              Sec. 36         Drilling operations concluded
     WI=68.2%               T157N-R98W       on September 17, 2010.
    NRI=54.5%           Williams County, ND  Completion assembly installed
                                             to facilitate a 32-stage
                                             hydraulic fracture stimulation
                                             completion.  Frac crews are
                                             finalizing the completion to
                                             place the well on production.

Hodenfield 15-23H            Sec. 23         Drilling operations concluded
     WI=55.3%               T157N-R98W       on September 16, 2010.
    NRI=44.2%           Williams County, ND  Completion assembly installed
                                             to facilitate a 30-stage
                                             hydraulic fracture stimulation
                                             completion.  No completion
                                             date has been set.

    Reid 3-3H                Sec. 3          Drilling operations concluded
     WI=59.3%               T157N-R97W       on October 17, 2010.
    NRI=47.4%           Williams County, ND  Completion assembly installed
                                             to facilitate a 27-stage
                                             hydraulic fracture stimulation
                                             completion.  No completion
                                             date has been set.

 Bergstrom 2-28H             Sec. 28         Drilling operations also
     WI=83.1%               T156N-R98W       concluded on October 17, 2010.
    NRI=66.5%           Williams County, ND  Completion assembly installed
                                             to facilitate a 22-stage
                                             hydraulic fracture stimulation
                                             completion.  No completion
                                             date has been set.

Dustin Brose 2-29H           Sec. 29         Drilling operations concluded
     WI=81.4%               T156N-R98W       on November 7, 2010.
    NRI=65.1%           Williams County, ND  Completion assembly installed
                                             to facilitate a 30-stage
                                             hydraulic fracture stimulation
                                             completion.  No completion
                                             date has been set.

  Twilight 1-24H             Sec. 24         Ensign drilling rig 24
     WI=32.75%              T156N-R99W       commenced drilling on October
    NRI=26.2%           Williams County, ND  18, 2010 and is currently
                                             drilling in the lateral
                                             portion in the targeted Bakken
                                             formation.

   Haug 14-19H               Sec. 19         Unit drilling rig 234
     WI=85.4%               T156N-R98W       commenced drilling on October
    NRI=68.3%           Williams County, ND  23, 2010 and is currently
                                             drilling the vertical portion
                                             of the well.

   Dahl 15-22H               Sec. 22         Ensign drilling rig 88
     WI=64.5%               T156N-R97W       commenced drilling on October
    NRI=51.6%           Williams County, ND  25, 2010 and is currently
                                             cementing the 9-5/8 casing in
                                             the vertical portion of the
                                             well.

Foss Family Trust            Sec. 23         Preparations are underway to
     15-23H                 T156N-R97W       move Nabors drilling rig 486
     WI=51.4%           Williams County, ND  from the Dustin Brose well
    NRI=41.1%                                location.  This well is
                                             expected to commence drilling
                                             during the third week of
                                             November 2010.

American Oil & Gas Inc. is an independent oil and natural gas company engaged in exploration, development and production of hydrocarbon reserves primarily in the Rocky Mountain region. Additional information about American Oil & Gas Inc. can be found at the Company's website: www.americanog.com.

  Selected
  Financial
    and
  Operating
    Data           Three Months Ended             Nine Months Ended
              ----------------------------   -----------------------------
                 9/30/10         9/30/09        9/30/10         9/30/09
              -------------   ------------   --------------  -------------
CASH FLOW
 RECAP:
Net cash
 (used) by
 operating
 activities   $  (1,277,518)  $   (469,666)  $   (2,695,118) $  (3,057,074)
Net cash
 (used) for
 investing
 activities   $ (35,074,823)  $   (285,934)  $  (24,934,604) $  (7,214,875)
Net cash
 provided by
 financing
 activities   $      87,500   $          -   $      804,150  $           -

FINANCIAL
 RECAP:
Oil and gas
 sales        $   4,806,383   $    462,553   $    8,083,918  $   1,285,705
Net income/
 (loss)       $    (119,266)  $ (3,400,573)  $   27,661,320  $  (8,892,054)
Net loss per
 common share
 - basic      $           -   $      (0.07)  $         0.46  $       (0.18)
Net loss per
 common share
 - diluted    $           -   $      (0.07)  $         0.45  $       (0.18)

OPERATING
 DATA:
Net oil
 production
 (Bbl)               73,112          4,877          119,374         14,056
Oil revenues  $   4,725,598   $    288,567   $    7,669,920  $     658,759
Average oil
 price per
 Bbl          $       64.64   $      59.17   $        64.25  $       46.87

Net gas
 production
 (Mcf)               17,040         49,949           68,324        183,386
Natural gas
 revenues     $      80,785   $    173,986   $      413,998  $     626,946
Average gas
 price per
 Mcf          $        4.74   $       3.48   $         6.06  $        3.42

Barrels of
 oil
 equivalent
 sold ("BOE")        75,952         13,202          130,761         44,620

Lease
 operating
 expenses and
 production
 taxes        $     912,493   $    278,429   $    1,777,764  $     848,354
LOE and
 production
 taxes per
 BOE          $       12.01   $      21.09   $        13.60  $       19.01

Depreciation,
 depletion
 and
 amortization
 - oil and
 gas
 properties   $   1,601,000   $    212,001   $    2,551,000  $     546,000
DD&A per BOE  $       21.08   $      16.06   $        19.51  $       12.24

Investment
 income       $      38,255   $      9,632   $      137,070  $      47,949
Impairment
 expense -
 oil and gas
 assets       $           -   $  1,850,000   $            -  $   3,950,000
Impairment of
 well
 equipment
 inventory    $      26,571   $    409,852   $      200,356  $     565,991
Accretion of
 asset
 retirement
 obligation   $       3,741   $      9,837   $       16,849  $      30,057
Gain on sale
 of oil and
 gas
 properties   $           -   $          -   $   36,400,000  $           -
Income tax
 provision -
 current      $    (200,000)  $   (149,965)  $            -  $    (149,965)
Income tax
 provision
 (benefit) -
 deferred     $    (205,000)  $          -   $    6,125,000  $           -
General and
 administra-
 tive
 expenses     $   2,804,686   $  1,198,188   $    6,168,688  $   4,242,539

This release and the Company's website referenced in this release contain forward-looking statements regarding American Oil & Gas Inc.'s future plans and expected performance that are based on assumptions the Company believes to be reasonable. A number of risks and uncertainties could cause actual results to differ materially from these statements, including, without limitation, the success rate of drilling efforts and the timeliness of development activities, fluctuations in oil and gas prices, and other risk factors described from time to time in the Company's reports filed with the SEC. In addition, the Company operates in an industry sector where securities values are highly volatile and may be influenced by economic and other factors beyond the Company's control. The Company undertakes no obligation to publicly update these forward-looking statements to reflect events or circumstances that occur after the issuance of this press release or to reflect any change in the Company's expectations with regard to these forward-looking statements or the occurrence of any unanticipated events. This press release may include the opinions of American Oil & Gas Inc., and does not necessarily include the views of any other person or entity.

Important Information for Investors and Stockholders

In connection with the proposed merger transaction involving Hess Corporation ("Hess") and American Oil & Gas Inc. ("American"), Hess has filed with the U.S. Securities and Exchange Commission (the "SEC") on November 12, 2010 an amended registration statement on Form S-4 containing a proxy statement/prospectus. Hess and American may also file other documents with the SEC regarding the proposed transaction. The proposed merger transaction involving Hess and American will be submitted to American's stockholders for their consideration and a definitive proxy statement/prospectus will be mailed to American's stockholders. INVESTORS AND SECURITY HOLDERS OF AMERICAN ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS REGARDING THE PROPOSED TRANSACTION THAT WILL BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY DO AND WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and stockholders will be able to obtain free copies of the proxy statement/prospectus and other documents containing important information about Hess and American, once such documents are filed with the SEC, through the website maintained by the SEC at http://www.sec.gov. Copies of the documents filed with the SEC by Hess will be available free of charge on Hess' internet website at www.hess.com or by contacting Hess' Corporate Secretary Department at 212-536-8602. Copies of the documents filed with the SEC by American will be available free of charge on American's internet website at www.americanog.com or by contacting American's Investor Relations Department at 303-449-1184.

Hess, American, their respective directors and executive officers and other persons may be deemed to be participants in the solicitation of proxies from the stockholders of American in connection with the proposed transaction. Information about the directors and executive officers of Hess is set forth in its proxy statement for its 2010 annual meeting of stockholders and in its annual report on Form 10-K as amended, which were filed with the SEC on March 25, 2010 and February 26, 2010 (as amended on November 8, 2010) , respectively. Information about the directors and executive officers of American is set forth in its proxy statement for its 2010 annual meeting of stockholders and in its annual report on Form 10-K, as amended, which were filed with the SEC on May 14, 2010 and March 15, 2010 (as amended on March 29, 2010 and April 30, 2010), respectively. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, is contained in the proxy statement/prospectus and other relevant materials that have been filed with the SEC.

This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities, a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

Contact Information

  • Contact:
    Andrew Calerich
    President
    303.991.0173
    Fax: 303.595.0709
    1050 17th Street, Suite 2400
    Denver, CO 80265

    Neal Feagans
    Investor Relations
    Feagans Consulting, Inc
    303.449.1184