SOURCE: FX Energy, Inc.

August 10, 2009 16:00 ET

FX Energy Reports Second Quarter Income; Non-Cash Items Dominate Quarter Results

SALT LAKE CITY, UT--(Marketwire - August 10, 2009) - FX Energy, Inc. (NASDAQ: FXEN) today announced financial results for its second quarter ended June 30, 2009. The Company reported net income of $11.1 million, or $0.26 per share, for the second quarter of 2009. Excluding non-cash foreign currency exchange gains of $13.8 million, the Company would have recorded a second quarter loss of $(2.7) million, or $(0.06) per share. Both figures compare to a net loss of $(1.5) million, or $(0.04) per share reported in the second quarter of 2008.

Non-cash Foreign Exchange Effects

The foreign exchange gain of $13.8 million for the second quarter of 2009 and the foreign exchange loss of ($6.7) million for the first half are both included in other income and expense. These figures come primarily from recognition of gains and losses on intercompany loans from FX Energy, Inc. to FX Poland, the Company's wholly owned subsidiary. Foreign exchange effects like these are non-cash only, and are likely to continue to vary greatly depending upon future exchange rate changes.

Second Quarter Results

The Company's total net production decreased from 427 Mmcfe during the second quarter of 2008 to 328 Mmcfe during the 2009 quarter. The production decline is due almost entirely to the Company's Wilga well in eastern Poland, as discussed in previous releases and SEC filings. Production from the Zaniemysl well in western Poland where the Company owns a 24.5% interest remained basically unchanged.

Lower gas production led to lower revenues, $1.8 million for the 2009 second quarter versus $4.2 million for the 2008 quarter. Lower oil prices, $50.45 in the 2009 second quarter compared to $111.41 per barrel during the same quarter of 2008, also contributed to lower revenues. Gas prices in Poland were higher in the 2009 second quarter than in the same quarter of 2008, but a weaker Polish zloty resulted in a decrease when converted to U.S. dollars. The average exchange rate during the second quarter of 2008 was 2.18 zlotys per U.S. dollar. The average exchange rate during the second quarter of 2009 was 3.27 zlotys per U.S. dollar, a change of 50%.

Though gas production from the Wilga well is expected to continue to decline, total company-wide production is expected to increase later this year. Production from the Company's largest discovery to date, the Roszkow well in Poland, remains on track to start within three months. The Roszkow well is expected to boost daily production at year-end 2009 to production levels well ahead of those of 2007 and 2008 year-end.

"Based upon a long history of production from the Rotliegend sandstone in Europe and our own Zaniemysl well, we believe that, unlike Wilga, these Rotliegend reservoirs will provide a much more stable and predictable production rate going forward," said Clay Newton, VP Finance for FX Energy.

Six Month Results

The Company reported a net loss of $(13.3) million, or $(0.31) per share, for the first half of 2009. Excluding non-cash foreign currency exchange losses of $6.7 million, the Company would have recorded a first half loss of $(6.6) million, or $(0.16) per share, compared to a net loss of $(5.8) million, or $(0.15) per share reported in the first half of 2008. The Company reported earnings before interest, taxes, depreciation, amortization, exploration expense, and other non-cash charges (EBITDAX)(1) during the first half of 2009 of $(1.0) million, compared to $3.3 million in the first half of 2008. At June 30, 2009, the Company's cash and investments were $6.4 million.

Oil and gas revenues for the 2009 first half were 52% lower than those recorded during the same period of 2008. The Company recognized oil and gas revenues of $3.6 million, compared to $7.5 million for the first half of 2008. Total revenues for the first half of 2009 were $4.2 million, compared to $9.4 million in the first half of 2008.

Natural gas production in Poland was 516 Mmcf during the first half of 2009, compared to 639 Mmcf during the same period of 2008, with the majority of the production decline associated with the Wilga well. Although gas prices in Poland were higher, average gas prices as reported in U.S. dollars declined by 31% from 2008 to 2009, a function of the weaker Polish zloty. The average exchange rate during the first half of 2008 was 2.29 zlotys per U.S. dollar. The average exchange rate during the second quarter of 2009 was 3.36 zlotys per U.S. dollar, a change of 47%.

Earnings Conference Call Today, Monday, August 10, 2009 at 4:30 P.M. Eastern (2:30 P.M. Mountain)

The Company will host a conference call and webcast today to discuss 2009 second quarter results and update operational items at 4:30 p.m. Eastern Time. Conference call information is as follows: U.S. dial-in-number: 888-329-8903; International dial-in-number: 719-325-2490. Passcode: 7315454. 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. A rebroadcast will also be available through the Company's website. For those that are unable to participate in the live call, a rebroadcast will be available 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 U.S. 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

(1) Explanation and Reconciliation of Non-GAAP Financial Measures

Earnings before interest, taxes, depreciation, amortization, and exploration expense (EBITDAX) is a non-GAAP measure presented because of its acceptance as an indicator of an oil and gas exploration and production Company's ability to internally fund exploration and development activities and to service debt. EBITDAX should not be considered in isolation or as a substitute for operating income prepared in accordance with generally accepted accounting principles. The table below reconciles EBITDAX with income from continuing operations as derived from the Company's financial information.

     EBITDAX:                                      Six Months Ended
                                                 June 30,   June 30,
                                                   2009       2008
                                                 ---------  ---------
     Net loss                                    $ (13,314) $  (5,780)
     Foreign exchange loss (gain)                    6,680       (117)
     Exploration expense                             3,385      6,277
     Depletion, depreciation and amortization          748      1,447
     Interest (income) expense, net                    271        (99)
     Other non-cash items                            1,235      1,526
                                                 ---------  ---------
     EBITDAX                                     $    (995) $   3,254
                                                 =========  =========

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)

                                                    June 30,   December 31,
                                                      2009         2008
                                                  -----------  -----------
ASSETS

Current assets:
  Cash and cash equivalents                       $     6,171  $    16,588
  Marketable securities                                   255        4,105
  Receivables:
    Accrued oil and gas sales                             866        1,093
    Other receivables                                   2,319        1,720
    Input VAT receivable                                  815        2,514
  Inventory                                               220          211
  Other current assets                                    226          450
                                                  -----------  -----------
      Total current assets                             10,872       26,681
                                                  -----------  -----------

Property and equipment, at cost:
  Oil and gas properties (successful efforts
   method):
    Proved                                             30,501       28,600
    Unproved                                            2,760        2,770
  Other property and equipment                          7,210        6,667
                                                  -----------  -----------
    Gross property and equipment                       40,471       38,037
  Less accumulated depreciation, depletion and
   amortization                                       (11,704)     (11,164)
                                                  -----------  -----------
    Net property and equipment                         28,767       26,873
                                                  -----------  -----------

Other assets:
  Certificates of deposit                                 406          406
  Loan fees                                               869          842
                                                  -----------  -----------
    Total other assets                                  1,275        1,248
                                                  -----------  -----------

Total assets                                      $    40,914  $    54,802
                                                  ===========  ===========

                      --Continued--


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

                                                    June 30,   December 31,
                                                      2009         2008
                                                  -----------  -----------
LIABILITIES AND STOCKHOLDERS EQUITY

Current liabilities:
  Accounts payable                                $     5,815  $     7,779
  Accrued liabilities                                     390        4,937
                                                  -----------  -----------
   Total current liabilities                            6,205       12,716
                                                  -----------  -----------

Long-term liabilities:
  Notes payable                                        25,000       25,000
  Asset retirement obligation                           1,912        1,932
                                                  -----------  -----------
   Total long-term liabilities                         26,912       26,932
                                                  -----------  -----------

    Total liabilities                                  33,117       39,648
                                                  -----------  -----------

Stockholders' equity:
  Preferred stock, $0.001 par value, 5,000,000
   shares authorized as of June 30, 2009 and
   December 31, 2008; no shares outstanding                --           --
  Common stock, $0.001 par value, 100,000,000
   shares authorized as of June 30, 2009 and
   December 31, 2008; 42,451,228 and 42,202,878
   shares issued and outstanding as of June 30,
   2009 and December 31, 2008, respectively                42           42
  Additional paid-in capital                          159,654      158,075
  Cumulative translation adjustment                    21,515       17,137
  Accumulated deficit                                (173,414)    (160,100)
                                                  -----------  -----------
  Total stockholders' equity                            7,797       15,154
                                                  -----------  -----------

Total liabilities and stockholders' equity        $    40,914  $    54,802
                                                  ===========  ===========




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

                                   For the three months For the six months
                                      ended June 30,      ended June 30,
                                    ------------------  ------------------
                                      2009      2008      2009      2008
                                    --------  --------  --------  --------
Revenues:
  Oil and gas sales                 $  1,833  $  4,197  $  3,595  $  7,469
  Oilfield services                      633       998       653     1,951
                                    --------  --------  --------  --------
   Total revenues                      2,466     5,195     4,248     9,420
                                    --------  --------  --------  --------

Operating costs and expenses:
  Lease operating expenses               811       891     1,558     1,768
  Exploration costs                    1,265     2,226     3,385     6,277
  Oilfield services costs                437       710       618     1,276
  Depreciation, depletion and
   amortization                          374       732       748     1,447
  Accretion expense                        8        21        16        42
  Stock compensation                     444       619       883     1,245
  General and administrative           1,670     1,654     3,402     3,360
                                    --------  --------  --------  --------
   Total operating costs and
    expenses                           5,009     6,853    10,610    15,415
                                    --------  --------  --------  --------

                                    --------  --------  --------  --------
Operating loss                        (2,543)   (1,658)   (6,362)   (5,995)
                                    --------  --------  --------  --------

Other income (expense):
  Interest income (expense), net and
   other income (expense)               (137)       76      (272)       99
  Foreign exchange gain (loss)        13,770        94    (6,680)      116
                                    --------  --------  --------  --------
   Total other income (expense)       13,633       170    (6,952)      215
                                    --------  --------  --------  --------
Net income (loss)                     11,090    (1,488)  (13,314)   (5,780)

Other comprehensive income (loss)
  Foreign currency translation
   adjustment                        (10,983)        -     4,378         -
  Increase (decrease) in market
   value of available for sale
   marketable securities                   -        82         -      (223)
                                    --------  --------  --------  --------
Comprehensive income (loss)         $    107  $ (1,406) $ (8,936) $ (6,003)
                                    ========  ========  ========  ========

Net income (loss) per common share
   Basic                            $   0.26  $  (0.04) $  (0.31) $  (0.15)
   Diluted                          $   0.26  $  (0.04) $  (0.31) $  (0.15)
Weighted average common shares
 outstanding
   Basic                              42,451    40,303    42,424    39,678
   Dilutive effect of stock options      153         -         -         -
                                    --------  --------  --------  --------
   Diluted                            42,604    40,303    42,424    39,678
                                    ========  ========  ========  ========




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

                                                   For the Six Months Ended
                                                            June 30,
                                                      --------------------
                                                        2009       2008
                                                      ---------  ---------
Cash flows from operating activities:
  Net loss                                            $ (13,314) $  (5,780)
  Adjustments to reconcile net loss to net cash
   used in operating activities:
    Depreciation, depletion and amortization                748      1,447
    Accretion expense                                        16         42
    Amortization of bank fees                                92         91
    Stock compensation                                      883      1,245
    Foreign exchange losses (gains)                       5,410       (116)
    Common stock issued for services                        724        665
  Increase (decrease) from changes in working
   capital items:
    Receivables                                             509     (3,418)
    Inventory                                                (9)       (33)
    Other current assets                                    195        214
    Other assets                                           (122)        61
    Accounts payable and accrued liabilities             (2,623)    (1,930)
                                                      ---------  ---------
     Net cash used in operating activities               (7,491)    (7,512)
                                                      ---------  ---------

Cash flows from investing activities:
  Additions to oil and gas properties                    (4,064)    (4,760)
  Additions to other property and equipment                (545)      (523)
  Additions to marketable securities                        (10)      (204)
  Proceeds from maturities of marketable securities       4,398      6,000
                                                      ---------  ---------
     Net cash (used in) provided by investing
      activities                                           (221)       513
                                                      ---------  ---------

Cash flows from financing activities:
  Payments on loan related to auction-rate securities    (2,709)        --
  Proceeds from exercise of stock options and warrants       --      7,169
                                                      ---------  ---------
     Net cash (used in) provided by financing
      activities                                         (2,709)     7,169
                                                      ---------  ---------

Effect of exchange rate changes on cash                       4         --
                                                      ---------  ---------

Net increase (decrease) in cash                         (10,417)       170
Cash and cash equivalents at beginning of year           16,588      4,262
                                                      ---------  ---------

Cash and cash equivalents at end of period            $   6,171  $   4,432
                                                      =========  =========

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