SOURCE: FX Energy, Inc.

March 07, 2011 16:00 ET

FX Energy Reports Record 2010 Revenues and Operating Income; Looks to Continued Improvement in 2011

SALT LAKE CITY, UT--(Marketwire - March 7, 2011) - FX Energy, Inc. (NASDAQ: FXEN) today announced financial results for its fourth quarter and full year of 2010. The Company reported a net loss for the full year 2010 of $0.8 million, or $0.02 per share, compared to a net loss in 2009 of $0.5 million, or $0.01 per share. Included in the Company's yearly results were non-cash foreign exchange losses of $4.2 million in 2010 and non-cash foreign exchange gains of $7.1 million in 2009. The Company's operating income rose from an operating loss of $7.0 million in 2009 to operating income of $4.6 million in 2010. Much of the improvement is due to the Company's record revenues in 2010 of $25.0 million.

For the fourth quarter of 2010, the Company reported a net loss of $1.8 million, or $0.04 per share, compared to net income of $3.3 million, or $0.08 per share, during the same quarter of 2009. The 2010 fourth quarter results were negatively impacted by $1.4 million in non-cash foreign exchange charges, while positive non-cash foreign exchange items of $1.5 million contributed to the 2009 fourth quarter.

Record Oil and Gas Production Drives Full Year Revenues Higher

For the full year 2010, the Company reported record oil and gas production of 3,839 million cubic feet of gas equivalent (Mmcfe), or 10.5 million cubic feet of gas equivalent per day (Mmcfe/d). This compares to 2,266 Mmcfe (6.2 Mmcfe/d) during 2009, an increase of 69%. The Company's fourth quarter 2010 oil and gas production was 931 Mmcfe (10.3 Mmcfe/d), a decrease of 14% from 1,080 Mcfe (12.0 Mmcfe/d) during the same quarter of 2009. The record 2010 production, in combination with slightly higher oil and gas prices, led to record oil and gas revenues of $22.9 million, compared to $12.8 million for 2009, an increase of 79%. Total revenues rose 71% from $14.7 million in 2009 to $25.0 million in 2010.

Clay Newton, FX's Vice President Finance, remarked, "Our successful expansion efforts in Poland over the last several years have resulted in substantial new production. Our Polish exploration and production successes are now the primary drivers of our operating results. In particular, our Roszkow discovery and completion of our KSK production facilities have become major factors in our results.

"The Company expects to see further production gains in 2011 as the KSK facilities come into full operating status. Its Sroda-4 well began producing into these new facilities at year-end. The Company expects its two Kromolice wells to begin producing into these new facilities in the second quarter of 2011. Once all three wells are on production, they should contribute approximately 7 Mmcfe/d to the Company's net production. This could lead to another record year for oil and gas revenue."

In Turn, Record Revenues Drive Operating Results Higher

The Company's full year operating results improved significantly. Total revenues from all sources were up 71% from 2009 to 2010. The Company recorded oil and gas revenues of $22.9 million, compared to $12.8 million for 2009, an increase of 79%. Net operating income of $4.6 million for 2010 was a record for the Company, an improvement of $11.6 million from the operating loss of $7.0 million during 2009.

For the full year 2010, the Company's total net production increased to 3,839 Mmcfe (10.5 Mmcfe/d) from 2,266 Mmcfe (6.2 Mmcfe/d) during 2009. The production increase was due entirely to having a full year of production from the Company's Roszkow well. Higher oil and gas prices augmented the revenue increase. The Company's average price for natural gas in Poland increased 8% from 2009 levels, averaging $5.39 per thousand cubic feet (Mcf). Polish gas tariffs were increased by a total of 14% through two price increases during the year. The first increase came in the third quarter, followed by a second increase in the fourth quarter. Oil prices also increased, with prices averaging $68 per barrel, up 31% from $52 per barrel in 2009.

Exploration expenses decreased 38% from 2009 levels. These expenses, which reflected the Company's seismic acquisition, processing, and interpretation activities throughout its Poland acreage, dropped from $4.8 million in 2009 to $3.0 million in 2010, as the Company continued its practice of matching expenditures with available cash.

Included in non-cash charges for both years are foreign exchange gains and losses related to dollar-denominated intercompany loans, notes payable and unpaid interest held by FX Energy Poland. These are non-cash items primarily related to currency exchange rate fluctuations between reporting periods.

Fourth Quarter Production Declines Affect Revenues

As mentioned above, the Company recorded a net loss of $1.8 million (including the effects of $1.4 million of non-cash charges) during the fourth quarter of 2010. Total fourth quarter 2010 production of 931 Mmcfe (10.5 Mmcfe/d) was 14% lower than the 1,080 (12.0 Mmcfe/d) Mmcfe in the fourth quarter of 2009. Oil and gas revenues were $6.1 million, 6% lower than the $6.5 million recorded in the fourth quarter of 2009.

The production and revenue decreases for the quarter were due in large part to production declines implemented at the Company's two primary wells in Poland by the operator of the wells, which took effect on October 1, 2010. Daily production rates at both wells were reduced by 7%. In addition, the Company's Kleka well stopped producing during early 2010, which added to the fourth quarter decline. An increase in Polish natural gas prices offset some of the production declines. The average gas price in Poland during the fourth quarter of 2010 was $6.01 per Mcf compared to $5.53 per Mcf during the fourth quarter of 2009. Oil prices also increased, resulting in 2% higher oil revenues from the Company's US oil production during the fourth quarter 2010.

Cash Flow Helps Drive Balance Sheet Improvements

Cash flow from operating activities climbed to $7.2 million during 2010 from cash used in operating activities during 2009 of $5.8 million, a yearly improvement of $13.0 million. This improved cash flow was amplified with a successful registered-direct offering of 1.5 million shares of common stock in December. At December 31, 2010, the Company's cash balance was approximately $19.7 million. Working capital was $18.2 million at December 31, 2010 versus $3.5 million at December 31, 2009. Long-term debt was $35.0 million at the end of 2010.

Earnings Conference Call Today, Monday, March 7, 2011 at 4:30 PM. Eastern (2:30 PM. Mountain)

The Company will host a conference call and webcast today to discuss 2010 full year and fourth quarter results at 4:30 p.m. Eastern Time. The call will also include a discussion of the Company's current operations. Conference call information is as follows: Dial-In-Number: 866-293-8972; International: 913-312-6679; Passcode: 8212782. Request: FX Energy, Inc. Conference Call.

The call will also be webcast live and interested parties may access the webcast through FX Energy's homepage at www.fxenergy.com. For those that are unable to participate in the live call, a rebroadcast will be available through the Company's website for two weeks beginning one hour after the completion of the call.

About FX Energy

FX Energy is an independent oil and gas exploration and production company with production in the US and Poland. The Company's main exploration activity is focused on Poland's Permian Basin where the gas-bearing Rotliegend sandstone is a direct analog to the Southern Gas Basin offshore England. The Company trades on the NASDAQ Global Market under the symbol FXEN. Website www.fxenergy.com.

FORWARD-LOOKING STATEMENTS

This press release and the related earnings conference call contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future performance. For example, exploration, drilling, development, construction or other projects or operations may be subject to the successful completion of technical work; environmental, governmental or partner approvals; equipment availability, or other things that are or may be beyond the control of the Company. Operations that are anticipated, planned or scheduled may be changed, delayed, take longer than expected, fail to accomplish intended results, or not take place at all.

In carrying out exploration it is necessary to identify and evaluate risks and potential rewards. This identification and evaluation is informed by science but remains inherently uncertain. Subsurface features that appear to be possible traps may not exist at all, may be smaller than interpreted, may not contain hydrocarbons, may not contain the quantity or quality estimated, or may have reservoir conditions that do not allow adequate recovery to render a discovery commercial or profitable. Forward-looking statements about the size, potential or likelihood of discovery with respect to exploration targets are certainly not guarantees of discovery or of the actual presence or recoverability of hydrocarbons, or of the ability to produce in commercial or profitable quantities. Estimates of potential typically do not take into account all the risks of drilling and completion nor do they take into account the fact that hydrocarbon volumes are never 100% recoverable. Such estimates are part of the complex process of trying to measure and evaluate risk and reward in an uncertain industry.

Forward-looking statements are subject to risks and uncertainties outside FX Energy's control, including risks and uncertainties as described in the Company's public filings with the SEC. Actual events or results may differ materially from the forward-looking statements. For a discussion of additional contingencies and uncertainties to which information respecting future events is subject, see FX Energy's SEC reports or visit FX Energy's website at www.fxenergy.com. In providing forward-looking statements, the Company is not undertaking any duty or obligation to update these statements publicly as a result of new information, future events or otherwise, except as required by law.

                    FX ENERGY, INC., AND SUBSIDIARIES
                        Consolidated Balance Sheets
                     As of December 31, 2010 and 2009
                              (in thousands)



                                                        2010       2009
                                                      ---------  ---------
ASSETS

Current assets:
  Cash and cash equivalents                           $  19,740  $   4,225
  Receivables:
    Accrued oil  and gas sales                            2,617      2,875
    Joint interest and other receivables                  2,013        918
    VAT receivable                                          392         --
  Inventory                                                 242        232
  Other current assets                                      293        394
                                                      ---------  ---------
      Total current assets                               25,297      8,644
                                                      ---------  ---------

Property and equipment, at cost:
  Oil and gas properties (successful efforts method):
    Proved                                               38,528     32,700
    Unproved                                              3,320      3,403
  Other property and equipment                            8,853      7,654
                                                      ---------  ---------
    Gross property and equipment                         50,701     43,757
  Less accumulated depreciation, depletion and
   amortization                                         (12,327)   (11,466)
                                                      ---------  ---------
      Net property and equipment                         38,374     32,291
                                                      ---------  ---------

Other assets:
  Certificates of deposit                                   406        406
  Loan fees                                               2,527        729
                                                      ---------  ---------
      Total other assets                                  2,933      1,135
                                                      ---------  ---------

Total assets                                          $  66,604  $  42,070
                                                      =========  =========




                    FX ENERGY, INC., AND SUBSIDIARIES
                        Consolidated Balance Sheets
                     As of December 31, 2010 and 2009
                    (in thousands, except share data)
                                -Continued-



                                                        2010       2009
                                                      ---------  ---------
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                    $   5,742  $   3,569
  VAT payable                                                --        575
  Accrued liabilities                                     1,343      1,048
                                                      ---------  ---------
    Total current liabilities                             7,085      5,192
                                                      ---------  ---------

Long-term liabilities:
  Notes payable                                          35,000     25,000
  Asset retirement obligation                               682      1,133
                                                      ---------  ---------
    Total long-term liabilities                          35,682     26,133
                                                      ---------  ---------

      Total liabilities                                  42,767     31,325
                                                      ---------  ---------

Commitments and Contingencies (Note 6)

Stockholders' equity:
  Preferred stock, $0.001 par value, 5,000,000 shares
   authorized as of December 31, 2010 and 2009; no
   shares outstanding                                        --         --
  Common stock, $0.001 par value, 100,000,000 shares
   authorized as of December 31, 2010 and 2009;
   45,284,527 and 43,037,540 shares issued and
   outstanding as of December 31, 2010 and 2009,
   respectively                                              45         43
  Additional paid-in capital                            171,167    160,594
  Cumulative translation adjustment                      14,013     10,738
  Accumulated deficit                                  (161,388)  (160,630)
                                                      ---------  ---------
      Total stockholders' equity                         23,837     10,745
                                                      ---------  ---------

Total liabilities and stockholders' equity            $  66,604  $  42,070
                                                      =========  =========




                    FX ENERGY, INC., AND SUBSIDIARIES
                  Consolidated Statements of Operations
          For the years ended December 31, 2010, 2009, and 2008
                 (in thousands, except per share amounts)



                                              2010       2009       2008
                                           ---------  ---------  ---------

Revenues:
  Oil and gas sales                        $  22,914  $  12,772  $  13,494
  Oilfield services                            2,099      1,892      4,347
                                           ---------  ---------  ---------
     Total revenues                           25,013     14,664     17,841
                                           ---------  ---------  ---------
Operating costs and expenses:
  Lease operating expenses                     3,473      3,478      3,441
  Exploration costs                            3,038      4,829     15,389
  Impairment of oil and gas properties           564      1,864     14,746
  Asset retirement obligation gain              (264)      (529)        --
  Oilfield services costs                      1,550      1,412      2,751
  Depreciation, depletion and amortization
   (DD&A)                                      2,626      1,602      1,720
  Accretion expense                               92         41         84
  Stock compensation                           1,379      1,693      2,367
  Bad debt expense                                --         --        460
  General and administrative costs (G&A)       7,973      7,257      7,030
                                           ---------  ---------  ---------
     Total operating costs and expenses       20,431     21,647     47,988
                                           ---------  ---------  ---------
Operating income (loss)                        4,582     (6,983)   (30,147)
                                           ---------  ---------  ---------

Other income (expense):
  Interest expense                            (1,936)      (654)      (672)
  Interest and other income                      829         54        394
  Foreign exchange gain (loss)                (4,233)     7,053    (24,279)
                                           ---------  ---------  ---------
     Total other income (expense)             (5,340)     6,453    (24,557)
                                           ---------  ---------  ---------

Net loss                                   $    (758) $    (530) $ (54,704)
                                           =========  =========  =========

Basic and diluted net loss per common
 share                                     $   (0.02) $   (0.01) $   (1.35)
                                           =========  =========  =========

Basic and diluted weighted average number
 of shares outstanding                        43,387     42,529     40,420
                                           =========  =========  =========




                    FX ENERGY, INC., AND SUBSIDIARIES
                  Consolidated Statements of Cash Flows
          For the years ended December 31, 2010, 2009, and 2008
                              (in thousands)



                                              2010       2009       2008
                                           ---------  ---------  ---------
Cash flows from operating activities:
  Net loss                                 $    (758) $    (530) $ (54,704)
  Adjustments to reconcile net loss to net
   cash used in operating activities:
     Depreciation, depletion and
      amortization                             2,626      1,602      1,720
     Impairment of oil and gas properties        564      1,864     14,746
     Accretion expense                            92         41         84
     (Gain) loss on property dispositions         --         --         (5)
     Stock compensation                        1,379      1,693      2,367
     Foreign exchange (gains) losses           4,238     (8,296)    22,306
     Common stock issued for services
      (G&A)                                      636        694        498
     Asset retirement obligation gain           (264)      (529)        --
     Loan fee amortization                       971        242        210
  Increase (decrease) from changes in
   working capital items:
     Receivables                              (1,809)     1,682     (3,056)
     Inventory                                   (10)       (21)       (33)
     Other current assets                        101         58        (85)
     Other assets                               (143)      (128)      (136)
     Accounts payable and accrued
      liabilities                               (289)    (4,025)     1,840
     Asset retirement obligations settled        (85)      (176)        --
                                           ---------  ---------  ---------
       Net cash provided by (used in)
        operating activities                   7,249     (5,829)   (14,248)
                                           ---------  ---------  ---------

Cash flows from investing activities:
  Additions to oil and gas properties         (6,475)    (7,666)   (21,808)
  Additions to other property and
   equipment                                  (1,339)      (983)    (1,077)
  Additions to marketable securities              --        (11)      (186)
  Proceeds from maturities of marketable
   securities                                     --      4,661     11,284
  Proceeds from sale of assets                    --         --         15
                                           ---------  ---------  ---------
       Net cash used in investing
        activities                            (7,814)    (3,999)   (11,772)
                                           ---------  ---------  ---------

Cash flows from financing activities:
  Proceeds from issuance of common stock,
   net of offering costs                       8,403         --         --
  Proceeds from notes payable, net of
   deferred loan fees                         32,532         --     25,000
  Payments of notes payable                  (25,000)        --         --
  Proceeds from loan related to
   auction-rate securities                        --         --      3,354
  Payments on loan related to auction-rate
   securities                                     --     (2,808)      (546)
  Proceeds from exercise of stock options
   and warrants                                  157        132     12,313
                                           ---------  ---------  ---------
       Net cash provided by (used in)
        financing activities                  16,092     (2,676)    40,121

Effect of exchange rate changes on cash          (12)       141     (1,775)
                                           ---------  ---------  ---------

Net increase (decrease) in cash               15,515    (12,363)    12,326
Cash and cash equivalents at beginning of
 year                                          4,225     16,588      4,262
                                           ---------  ---------  ---------

Cash and cash equivalents at end of year   $  19,740  $   4,225  $  16,588
                                           =========  =========  =========

Contact Information

  • SCOTT J. DUNCAN
    FX Energy, Inc.
    3006 Highland Drive, Suite 206
    Salt Lake City, Utah 84106
    (801) 486-5555 Fax (801) 486-5575
    www.fxenergy.com