SOURCE: FX Energy, Inc.

May 09, 2011 16:00 ET

FX Energy Reports Record First Quarter Production, Revenues and Cash Flow

SALT LAKE CITY, UT--(Marketwire - May 9, 2011) - FX Energy, Inc. (NASDAQ: FXEN) today announced financial results for its first quarter ended March 31, 2011. The Company reported first quarter net earnings of $6.5 million, or $0.14 per share. This compares to net income of $0.9 million, or $0.02 per share, for the first quarter of 2010. Included in the Company's quarterly results were non-cash foreign exchange gains of $6.8 million in 2011 and non-cash foreign exchange losses of $1.0 million in 2010.

Strong Balance Sheet Supports an Increased Capital Budget

Increasing revenues and cash flow have added to the Company's balance sheet liquidity over recent months. More importantly, a registered direct offering of 6.9 million shares of common stock in early March 2011 netted proceeds of $45.2 million. As a result, the Company repaid all amounts outstanding under its $55 million credit facility. At March 31, 2011, the Company's cash and investments were $29.6 million, with working capital of $27.7 million.

Clay Newton, FX's Vice President Finance, remarked, "Our balance sheet is stronger than ever before. With almost $30 million in cash, no debt, existing credit capacity, and expected record production, revenues and cash flow, we expect 2011 to be an exciting year, both financially and operationally. We are on track to see the largest capital spending in our history. Our anticipated total capital expenditures for the year are in the $60 to $70 million range. Also, our capital structure is sufficiently robust that we could finance even larger capital expenditures should economic opportunities be available."

Increased Production and Prices Drive Revenues Higher

Record first quarter production and higher product prices were the largest contributors to the Company's results. Total net oil and gas production was 1,060 million cubic feet equivalent (Mmcfe) during the first quarter of 2011, compared to 1,014 Mmcfe during the 2010 quarter. Net gas production increased from 918 million cubic feet in 2010 to 975 million cubic feet in 2011. Total revenues increased to $7.1 million during the first quarter of 2011 from $6.2 million during the same quarter of 2010. The production increase was due to natural gas production in Poland from the Company's Sroda-4 well, which began producing in December 2010.

Gas prices during the first quarter of 2011 averaged $6.12 per Mcf, compared to $5.39 per Mcf during the same quarter of 2010, an increase of 14%. Zloty denominated gas prices were higher in the 2011 first quarter than in the same quarter of 2010 due to two tariff increases during the second half of 2010. Exchange rates from quarter to quarter were essentially flat. Oil prices increased 20% over the year, averaging $81.69 per barrel in the first quarter of 2011, compared to $68.02 per barrel in the same quarter of 2010.

Production Gains Expected in Second Half

The Company expects production to begin at its two Kromolice wells in Poland during the second quarter of 2011. The two wells should produce at a gross rate of approximately 10.5 million cubic feet per day, or approximately 5.1 million cubic feet per day net to the Company. Once on line, this will increase the Company's net production to approximately 17 million cubic feet equivalent per day.

Operating Cash Flow Sets First Quarter Record; Non-cash Charges Continue to Vary

Net cash provided from operating activities of $4.7 million during the 2011 quarter increased 89% from the $2.5 million of cash provided by operating activities during the first quarter of 2010. The 2011 increase takes into account exploration costs that were $2.5 million greater than those of 2010.

The non-cash foreign exchange gain of $6.8 million and the foreign exchange loss of $1.0 million for the first quarters of 2011 and 2010, respectively, are included in other income and expense. The gains and losses come primarily from recognition of gains and losses on U.S. dollar denominated intercompany loans from FX Energy, Inc., to FX Poland, its wholly-owned subsidiary. These are non-cash gains and losses only, and could vary greatly depending upon future exchange rate changes.

Earnings Conference Call Today, Monday, May 9, 2011 at 4:30 PM. Eastern (2:30 PM. Mountain)

The Company will host a conference call and webcast today to discuss 2011 first quarter results and update operational items at 4:30 p.m. Eastern Time. Conference call information is as follows: US dial-in-number: 888-668-1645; International dial-in-number: 913-312-1463; Passcode: 3962262. 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 and production 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 report contains forward-looking statements. Forward-looking statements are not guarantees. 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. 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.



                     FX ENERGY, INC. AND SUBSIDIARIES
                        Consolidated Balance Sheets
                                (Unaudited)
                              (in thousands)



                                                   March 31,   December 31,
                                                      2011         2010
                                                  -----------  -----------
ASSETS

Current assets:
  Cash and cash equivalents                       $    29,581  $    19,740
  Receivables:
    Accrued oil and gas sales                           3,052        2,617
    Joint interest and other receivables                  211        2,013
    VAT receivable                                         --          392
  Inventory                                               240          242
  Other current assets                                    299          293
                                                  -----------  -----------
      Total current assets                             33,383       25,297
                                                  -----------  -----------

Property and equipment, at cost:
  Oil and gas properties (successful efforts
   method):
    Proved                                             43,029       38,528
    Unproved                                            3,488        3,320
  Other property and equipment                          9,033        8,853
                                                  -----------  -----------
    Gross property and equipment                       55,550       50,701
                                                  -----------  -----------
  Less accumulated depreciation, depletion and
   amortization                                       (13,201)     (12,327)
                                                  -----------  -----------
      Net property and equipment                       42,349       38,374
                                                  -----------  -----------

Other assets:
  Certificates of deposit                                 406          406
  Loan fees                                             2,506        2,527
                                                  -----------  -----------
      Total other assets                                2,912        2,933
                                                  -----------  -----------

Total assets                                      $    78,644  $    66,604
                                                  ===========  ===========








                     FX ENERGY, INC. AND SUBSIDIARIES
                        Consolidated Balance Sheets
                                (Unaudited)
                    (in thousands, except share data)
                                -Continued-



                                                   March 31,   December 31,
                                                      2011         2010
                                                  -----------  -----------
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                $     4,692  $     5,742
  VAT payable                                             117           --
  Accrued liabilities                                     864        1,343
                                                  -----------  -----------
    Total current liabilities                           5,673        7,085
                                                  -----------  -----------

Long-term liabilities:
  Notes payable                                            --       35,000
  Asset retirement obligation                             712          682
                                                  -----------  -----------
    Total long-term liabilities                           712       35,682
                                                  -----------  -----------

      Total liabilities                                 6,385       42,767
                                                  -----------  -----------

Stockholders' equity:
  Preferred stock, $0.001 par value, 5,000,000
   shares authorized as of March 31, 2011, and
   December 31, 2010; no shares outstanding                --           --
  Common stock, $0.001 par value, 100,000,000
   shares authorized as of March 31, 2011, and
   December 31, 2010; 52,315,827 and 45,284,527
   shares issued and outstanding as of March 31,
   2011, and December 31, 2010, respectively               52           45
  Additional paid-in capital                          217,524      171,167
  Cumulative translation adjustment                     9,537       14,013
  Accumulated deficit                                (154,854)    (161,388)
                                                  -----------  -----------
  Total stockholders' equity                           72,259       23,837
                                                  -----------  -----------

Total liabilities and stockholders' equity        $    78,644  $    66,604
                                                  ===========  ===========








                     FX ENERGY, INC. AND SUBSIDIARIES
      Consolidated Statements of Operations and Comprehensive Income
                                (Unaudited)
                 (in thousands, except per share amounts)



                                                 For the Three Months Ended
                                                          March 31,
                                                  ------------------------
                                                      2011         2010
                                                  -----------  -----------
Revenues:
  Oil and gas sales                               $     7,122  $     6,029
  Oilfield services                                        25          143
                                                  -----------  -----------
    Total revenues                                      7,147        6,172
                                                  -----------  -----------
Operating costs and expenses:
  Lease operating expenses                                770          881
  Exploration costs                                     2,877          363
  Oilfield services costs                                 141          169
  Depreciation, depletion and amortization                737          573
  Accretion expense                                        17           20
  Stock compensation                                      356          352
  General and administrative costs                      1,961        1,728
                                                  -----------  -----------
    Total operating costs and expenses                  6,859        4,086
                                                  -----------  -----------
Operating income                                          288        2,086
                                                  -----------  -----------

Other income (expense):
  Interest expense                                       (600)        (157)
  Interest and other income                                53            6
  Foreign exchange gain (loss)                          6,793       (1,006)
                                                  -----------  -----------
    Total other income (expense)                        6,246       (1,157)
                                                  -----------  -----------


Net income                                        $     6,534  $       929
                                                  ===========  ===========

Other comprehensive income:
  Foreign currency translation adjustment              (4,476)         758
                                                  -----------  -----------
Comprehensive income                              $     2,058  $     1,687
                                                  ===========  ===========

Basic and diluted net income per common share     $      0.14  $      0.02

Basic weighted average number of shares
 outstanding                                           45,943       42,474
                                                  ===========  ===========

Diluted weighted average number of shares
 outstanding                                           46,751       43,215
                                                  ===========  ===========










                     FX ENERGY, INC. AND SUBSIDIARIES
                  Consolidated Statements of Cash Flows
                                (Unaudited)
                              (in thousands)



                                                 For the Three Months Ended
                                                          March 31,
                                                  ------------------------
                                                      2011         2010
                                                  -----------  -----------
Cash flows from operating activities:
  Net income                                      $     6,534  $       929
  Adjustments to reconcile net income to net cash
   provided by operating activities:
    Depreciation, depletion and amortization              737          573
    Accretion expense                                      17           20
    Amortization of bank fees                             142           61
    Stock compensation                                    356          352
    Foreign exchange (gains) losses                    (6,783)       1,004
    Common stock issued for services                      706          635
  Increase (decrease) from changes in working
   capital items:
    Receivables                                         2,056        1,478
    Inventory                                               2           (8)
    Other current assets                                   (6)          70
    Other assets                                           --           --
    Accounts payable and accrued liabilities              936       (2,626)
                                                  -----------  -----------
      Net cash provided by operating activities         4,697        2,488
                                                  -----------  -----------

Cash flows from investing activities:
  Additions to oil and gas properties                  (5,445)        (487)
  Additions to other property and equipment              (188)        (171)
                                                  -----------  -----------
      Net cash used in investing activities            (5,633)        (658)
                                                  -----------  -----------

Cash flows from financing activities:
  Payments on credit facility                         (35,000)          --
  Proceeds from common stock offering, net             45,175           --
  Proceeds from exercise of stock options and
   warrants                                               128           --
                                                  -----------  -----------
      Net cash provided by financing activities        10,303           --
                                                  -----------  -----------

Effect of exchange rate changes on cash                   474          (26)
                                                  -----------  -----------

Net increase in cash                                    9,841        1,804
Cash and cash equivalents at beginning of year         19,740        4,225
                                                  -----------  -----------

Cash and cash equivalents at end of period        $    29,581  $     6,029
                                                  ===========  ===========



Contact Information

  • CONTACT:
    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