SOURCE: Petro Resources Corporation

May 19, 2008 08:00 ET

Petro Resources Announces First Quarter 2008 Financial Results and Operations Update

HOUSTON, TX--(Marketwire - May 19, 2008) - Petro Resources Corporation (AMEX: PRC) announces today the financial results of operations for the first quarter of 2008 and operations update.

For the three months ended March 31, 2008:

 -- Revenue was $3,158,001 compared to $850,028 for the same period in
    2007. This increase is the result of increased production and higher
    commodity prices.

    A net loss of $1,634,205 or ($.04) per share compared to a net loss of
    $72,711 or ($.00) per share for the first quarter of 2007. This loss
    included approximately $1.8 million in non-cash expenses for G&A, DD&A
    and losses on derivatives.  Operating income before exploration expense
    and non-cash items increased to $759,310 compared to $70,881 in 2007.


                                                     Three Months Ended
                                                          March 31,
                                                  ------------------------
                                                      2008         2007
                                                  -----------  -----------
    Revenue                                       $ 3,158,001  $   850,028
    Lease operating expense                        (1,222,398)    (482,139)
    General and administrative expense (cash         (698,808)           -
     only) (313,066)
    Realized gain (loss) on derivatives              (477,485)      16,058
                                                  -----------  -----------
                                                  $   759,310  $    70,881
                                                  ===========  ===========


 -- Production increased to 42,035 boe (barrels of oil equivalent) for the
    first quarter of 2008, an increase 16,503 boe compared to the first
    quarter of 2007.  This production increase is the result of a
    successful drilling program in the Permian Basin and increased
    production from the Williston Basin as a result of our water-flood
    re-pressurization program.

 -- Daily production for the quarter averaged 467 boe and the daily
    production exit rate was approximately 550 boe per day.

 -- Lease operating costs were $1,222,398 compared to $482,139 for the
    first quarter of 2007.  Lease operating costs are a direct reflection
    of production increases.

 -- Depreciation, depletion and accretion was $525,172 compared to $133,626
    for the period ended March 31, 2007. The increase is due to the higher
    production rates.

 -- General and administrative costs were $1,293,443 compared to $599,491
    in the first quarter of 2007.   General and administrative costs during
    the first quarter 2008 included $594,635 in non-cash costs related to
    stock options granted to board members and key members of the
    management team.

 -- Exploration expenses for the first quarter of 2008 were $572,510 as
    compared to $173,589 for the same period in 2007.   The 2008 expense
    includes approximately $107,071 of expense for 3-D seismic and a charge
    of approximately $465,439 for one dry hole drilled in North Dakota.

 -- The Company booked a loss on derivative contracts of $685,594 during
    the first quarter of 2008 as compared to a gain on derivative contracts
    of $554,529 for the first quarter of 2007.

Plan of Operations

Permian Basin

The Cinco Terry prospect area was recently expanded by 9,482 gross acres to a total of 31,382 gross acres in which the Company holds a 10% working interest. The drilling program in the Cinco Terry prospect has also been recently accelerated with the addition of a second drilling rig committed to this prospect for the balance of the year and the company expects to drill another 25 to 30 wells before year end. Year to date the Company has participated in 13 successful wells with no dry holes. Efforts are being made to increase gathering capacity through additional compression which should help to increase production.

North Dakota

The Company is currently building location in order to drill its first deep well in the Newporte prospect. The rig should be on location by the end of May. The well is projected to a total depth of approximately 10,000' and will penetrate the several prospective formations including the Madison Group, Bakken, Winnipegosis, Red River, and Deadwood Sandstone. The Company owns a 25% working interest in the Newporte Prospect area.

The Company is also currently building a drilling location for a horizontal well to be drilled in the East Flaxton Madison Unit. We anticipate that the rig should be moved to the location and commence drilling operations before the end of May. The Company owns a 49.3% working interest in the East Flaxton Madison Unit.

Other anticipated development drilling activities include two horizontal wells to be drilled in the Mohall Madison Unit as part of our water-flood re-pressurization program. The Company owns a 49.8% working interest in this unit. The Mohall Madison Unit and East Flaxton Units will be the second and third fields in our enhanced secondary oil recovery program to have new horizontal wells drilled.

Louisiana

A rig is scheduled to begin drilling operations at the Company's East Chalkley Prospect by late May or early June. This is an oil field appraisal and development project located in Cameron Parish, Louisiana. The prospective oil leg is located on the east flank of the East Chalkley Field. The Company holds approximately 34% working interest in the East Chalkley Prospect.

Management Comments

Don Kirkendall, President of Petro Resources, said, "We are very pleased to see the Company break the $3 million per quarter revenue threshold, which is obviously the top line indicator of the Company's growth. Although we would have certainly preferred to have posted positive net income for the quarter, I think it is important to recognize that a significant portion of our overall net loss is attributable to non-cash accounting items." He added, "The next 60 to 90 days will be a very exciting period for Petro Resources with the drilling of the deep Newporte test, the first horizontal well in East Flaxton and the first well in the East Chalkley Prospect."

About Petro Resources

Petro Resources Corporation is an independent exploration and production company engaged in the acquisition of properties and leases, exploration, development, exploitation, and production of oil and natural gas in the continental United States. For more information, please view our website at www.petroresourcescorp.com.

Forward-looking Statements

The statements contained in this press release that are not historical are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including statements, without limitation, regarding the Company's expectations, beliefs, intentions or strategies regarding the future. Such forward-looking statements relate to, among other things: (1) the Company's proposed exploration and drilling operations on its various properties, (2) the expected production and revenue from its various properties, and (3) estimates regarding the reserve potential of its various properties. These statements are qualified by important factors that could cause the Company's actual results to differ materially from those reflected by the forward-looking statements. Such factors include but are not limited to: (1) the Company's ability to finance the continued exploration and drilling operations on its various properties, (2) positive confirmation of the reserves, production and operating expenses associated with its various properties; and (3) the general risks associated with oil and gas exploration and development, including those risks and factors described from time to time in the Company's reports and registration statements filed with the Securities and Exchange Commission, including but not limited to the Company's Annual Report on Form 10-K for the year ended December 31, 2007 and Form 10-Q for the quarter ended March 31, 2008. The Company cautions readers not to place undue reliance on any forward-looking statements. The Company does not undertake, and specifically disclaims any obligation, to update or revise such statements to reflect new circumstances or unanticipated events as they occur.

                        PETRO RESOURCES CORPORATION
                        CONSOLIDATED BALANCE SHEETS
                                (Unaudited)


                                                  March 31,   December 31,
                                                    2008          2007
                                                ------------  ------------
                   Assets
Current assets:

Cash and cash equivalents                       $ 14,730,035  $ 15,399,547

Accounts receivable and accrued revenue            1,357,193       924,607

Prepaids                                                   -        25,519

Deferred financing costs, net of amortization
 of $1,513,586                                             -     2,378,492
                                                ------------  ------------
Total current assets                              16,087,228    18,728,165
                                                ------------  ------------

Property and equipment:
Oil and natural gas properties, successful
 efforts accounting

Unproved                                          26,646,067    24,676,434

Proved properties, net                            18,862,885    18,936,428

Furniture and fixtures, net                          118,981       118,354
                                                ------------  ------------
Total property and equipment                      45,627,933    43,731,216
                                                ------------  ------------

Other assets:

Investment in partnership                          3,892,944     3,892,944

Deposit                                               10,257        10,257

Deferred financing costs, net of amortization
 of $1,946,039                                     1,946,039             -
                                                ------------  ------------
Total other assets                                 5,849,240     3,903,201
                                                ------------  ------------

Total Assets                                    $ 67,564,401  $ 66,362,582
                                                ============  ============

  Liabilities and Shareholders' Equity
Current liabilities:

Accounts payable                                $  1,403,973  $  1,525,474

Short-term debt, net of discount of $2,956,206             -    11,344,136

Production floor payable                              50,575             -

Accrued liabilities                                  280,093       244,419
                                                ------------  ------------

Total current liabilities                          1,734,641    13,114,029

Market value of derivatives                        2,040,425     1,832,316

Long-term debt, net of discount of $2,418,715     13,321,478             -

Asset retirement obligation                        1,471,321     1,434,114
                                                ------------  ------------
Total liabilities                                 18,567,865    16,380,459
                                                ------------  ------------

Minority interest                                  2,898,550     3,025,375
                                                ------------  ------------

Redeemable Preferred Stock
  Series A Convertible Preferred Stock, $3
   stated value, issued 2,471,046 and 2,410,776
   shares as of March 31, 2008 and December,
   31, 2007, respectively; cumulative, dividend
   rate 10% per annum with liquidation
   preferences                                     7,413,137     7,232,329
                                                ------------  ------------

Shareholders' equity
  Preferred stock, $0.01 par value; 10,000,000
  shares authorized, 2,471,046 and 2,410,776
  shares of Series A Preferred Stock (reported
  above) issued and outstanding as of March 31,
  2008 and December 31, 2007, respectively                 -             -

  Common stock, $0.01 par value; 100,000,000
   shares authorized, 36,708,199 and 36,599,372
   shares issued and outstanding as of March
   31, 2008 and December 31, 2007,
   respectively                                      367,082       365,994

Additional paid in capital                        50,317,062    49,723,515

Accumulated deficit                              (11,999,295)  (10,365,090)
                                                ------------  ------------
Total shareholders' equity                        38,684,849    39,724,419
                                                ------------  ------------

Total Liabilities and Shareholders' Equity      $ 67,564,401  $ 66,362,582
                                                ============  ============


                        PETRO RESOURCES CORPORATION
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                                (Unaudited)


                                                    Three Months Ended
                                                        March 31,
                                                    2008          2007
                                                ------------  ------------
Revenue

Oil and gas sales                               $  3,058,001  $    750,028

Other income                                         100,000       100,000
                                                ------------  ------------

                                                   3,158,001       850,028
                                                ------------  ------------
Expenses

Lease operating expenses                           1,222,398       482,139

Exploration                                          572,510       173,589

Impairment of oil & gas properties                         -        15,712

Depreciation, depletion and accretion                525,172       133,626

General and administrative                         1,293,443       599,491
                                                ------------  ------------

Total expenses                                     3,613,523     1,404,557
                                                ------------  ------------

Loss from operations                                (455,522)     (554,529)
Other income and (expense)

Interest income                                       75,855        44,038

Interest expense                                    (514,961)     (113,256)

Gain (loss) on derivative contracts                 (685,594)      551,036
                                                ------------  ------------

Loss before minority interest                     (1,580,222)      (72,711)

Minority interest                                    126,825             -
                                                ------------  ------------

Net loss                                          (1,453,397)      (72,711)

Dividend on Series A Convertible Preferred          (180,808)            -
                                                ------------  ------------

Net loss attibutable to common stockholders     $ (1,634,205) $    (72,711)
                                                ============  ============

Earnings per common share

Basic and diluted                               $      (0.04) $      (0.00)

Weighted average number of common shares
 outstanding

Basic and diluted                                 36,652,831    21,179,763



                        PETRO RESOURCES CORPORATION
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (Unaudited)


                                                    Three Months Ended
                                                        March 31,
                                                --------------------------
                                                    2008          2007
                                                ------------  ------------

Cash flows from operating activities

Net loss                                        $ (1,453,397) $    (72,711)
Adjustments to reconcile net income to net cash
 (used in) provided by operating activities:

Minority interest                                   (126,826)            -

Depletion, depreciation, and accretion               525,172       133,626

Amortization included in interest expense            365,703       466,214

Impairment                                                 -        15,712

Dry hole costs                                       465,439       173,589

Issuance of common stock and stock options for
 services                                            594,635       286,425

Unrealized loss on derivative contracts              208,109      (534,978)

Changes in operating assets and liabilities:

Accounts receivable and accrued revenue             (432,586)     (493,454)

Prepaid expenses                                      25,519      (131,224)

Current portion of notes payable                           -       127,584

Accounts payable                                    (513,089)      282,448

Accrued expenses                                     109,553        35,115
                                                ------------  ------------
Net cash provided by (used in) operating
 activities                                         (231,768)      288,346
                                                ------------  ------------

Cash flows from investing activities

Capital expenditures                              (1,928,169)     (299,277)

Acquisition of Williston                                   -   (14,397,855)

Investment in partnership                                  -      (799,920)
                                                ------------  ------------
Net cash used in investing activities             (1,928,169)  (15,497,052)
                                                ------------  ------------

Cash flows from financing activities

Financing costs                                            -    (2,798,788)

Proceeds from loan                                 2,268,575    17,345,282

Principal payment on loan                           (778,150)            -
                                                ------------  ------------

Net cash provided by financing activities          1,490,425    14,546,494
                                                ------------  ------------

Net (decrease) in cash                              (669,512)     (662,212)

Cash, beginning of period                         15,399,547     4,285,204
                                                ------------  ------------

Cash, end of period                             $ 14,730,035  $  3,622,992
                                                ============  ============

Supplemental disclosure of cash flow
 information

Cash paid for interest                          $    395,682             -

Cash paid for federal income taxes                         -             -

Non-cash transactions
Common stock issued in acquisition of Williston
 Basin properties                                          -  $ 10,723,274

Royalty interest issued in connection with debt            -     4,118,971

Preferred stock dividend paid in preferred
 shares                                              180,808       162,435

Capitalized interest in oil and gas properties       850,738     1,227,695

Property and equipment included in accounts
 payable                                             317,710             -

Contact Information

  • Contact:
    Brad Holmes
    Investor Relations
    (713) 654-4009 or

    Don Kirkendall
    President
    (832) 369-6986