SOURCE: ReoStar Energy Corporation

ReoStar Energy Corporation

February 17, 2009 12:20 ET

ReoStar Energy Corp. Announces Third Quarter and Nine Months Fiscal Year 2009 Financial Results

FORT WORTH, TX--(Marketwire - February 17, 2009) - ReoStar Energy Corp. (OTCBB: REOS) announced results of operations for the Third Quarter and Nine Months Fiscal Year 2009, ended December 31, 2008.

Highlights of the Fiscal 2009 Third Quarter and Nine Months

--  Secured a $25MM senior secured credit facility in October
--  Nine Months Oil and gas revenues increased 73% to $5.9 million versus
    $3.4 million for the previous year nine months ended December 31, 2007
--  Nine Months oil production increased 45% to 35,600 barrels versus
    24,600 for the  same nine month period in the prior year
--  Nine Months gas productions increased 37% to 356,500 mcf versus
    260,300 mcf for the same nine month period in the prior year
    

Mark Zouvas, CEO of ReoStar, stated, "The industry has undergone unprecedented pricing volatility over the past year. We have shifted our focus from development drilling to improving operational efficiencies and cost control. With the Union Bank of California credit facility we are well positioned financially to withstand continued pricing volatility and expect to be in the position to seize the growth opportunities that have historically followed past industry wide slowdowns."

Third Quarter Fiscal Year 2009 Financial Review and Production Summary

In October, the Company closed on a $25MM senior secured credit facility with Union Bank of California. The credit facility provided an initial borrowing base of $14MM and matures in October 2011.

Oil and gas revenues for the third quarter ended December 31, 2008 were $0.9 million, compared with $1.6 million during the quarter ended December 31, 2007, a decrease of approximately 43%.

During the quarter ended December 31, 2008, ReoStar sold approximately 9,650 barrels of oil compared with approximately 9,980 barrels of oil for the quarter ended December 31, 2007, a decrease of approximately 3%. The average price for oil sold during the quarter ended December 31, 2008 was $55.90 per barrel compared with the average price for the quarter ended December 31, 2007 of $87.55 per barrel, a decrease of 36%.

The Company sold approximately 123,000 mcf of gas for the quarter ended December 31, 2008 compared with approximately 110,000 mcf of gas for the quarter ended December 31, 2007, an increase of approximately 12%. The average price for natural gas sold during the quarter ended December 31, 2008 was $3.10 per mcf (net of transportation, compression and CO2 charges) compared with $6.53 per mcf for the quarter ended December 31, 2007, a decrease of approximately 52.5%.

Total costs and expenses increased approximately 1% to $1.66 million versus $1.64 million the previous year. The Company reported a loss from continuing operations of $630 thousand compared to operating income of $97 thousand for the third quarter of the previous year.

Due to the drop in commodity prices combined with an increase in drilling costs, the Company has temporarily suspended its development drilling program in the Barnett Shale and has postponed plans to expand its enhanced oil recover project in Corsicana.

The Company drilled two successful exploratory wells in the Pecan Gap formation in our Corsicana project. The wells were completed in January and came on line with IP rates of approximately 45 barrels of oil per day. The Company is planning to begin drilling two additional exploratory wells in the Pecan Gap formation prior to the end of the fiscal year March 31, 2009.

Nine Months Fiscal Year 2009 Financial Review and Production Summary

Oil and gas revenues for the nine months ended December 31, 2008 were $5.9 million, compared with $3.4 million for the nine months ended December 31, 2007, an increase of approximately 73%.

During the nine months ended December 31, 2008, ReoStar sold approximately 35,600 barrels of oil compared with 24,600 barrels of oil for the nine months ended December 31, 2007, an increase of approximately 45%. The average price for oil sold during the nine month period ended December 31, 2008 was $103 per barrel compared the average price for the same period the previous year of $75 per barrel.

ReoStar sold approximately 356,500 mcf of gas for the nine months ended December 31, 2008 compared with 260,300 mcf of gas for the same period the previous year, an increase of approximately 37%. The average price for natural gas sold during the nine months ended December 31, 2008 was $6.33 per mcf (net of transportation, compression and CO2 charges) compared with $6.04 per mcf for the same period the previous year.

Net income for the nine months ended December 31, 2008 was $0.67 million, or $0.01 per share basic and diluted, compared to earnings of $1.4 million, or $0.02 per share basic and diluted from the same period the previous year. The company realized a $1.47 million gain on the sale of a pipeline during the previous year.

"This is a financially challenging time for many of those in our industry, as the worldwide economic instability continues to create turbulence in the market. In spite of these challenges we were able to continue to manage our costs and substantially increase our revenues for the nine months year over year. Going forward we believe we are well positioned and well capitalized to seize opportunities to acquire properties and other companies at favorable terms. Our outlook going forward remains positive as we have remained disciplined in our acquisition and drilling strategy, while utilizing our cash flow from operations to establish significant infrastructure in our key areas of development. Our portfolio of high quality prospects in Barnett give us the ability to move quickly as the markets recovers. We are confident our risk-balanced approaches to drilling which mitigates shot-term risks, will greatly enhance the Company's growth and future shareholder value," further commented Mr. Zouvas.

About ReoStar Energy Corporation

ReoStar Energy Corporation (OTCBB: REOS), headquartered in Fort Worth, Texas, is an oil and gas company engaged in the acquisition, development and production of natural gas and oil properties with operations primarily focused on developmental resource plays and enhanced oil recovery projects. The Company has vertically integrated its assets to remove potential obstacles to growth, which will enable it to develop and produce assets without the risk, cost and time involved in traditional exploration.

The Company's strategy is to acquire an attractive portfolio of oil reserves for a low cost, which have a high ratio of possible, probable or proven undeveloped reserves. By converting these undeveloped reserves into proved producing reserves, the Company will continue to realize an increase in the overall value at low risk and cost.

The Company's assets include approximately 20,000 gross (16,250 net) acres of mineral leasehold located in Texas (Barnett & Corsicana) and Arkansas (Fayetteville). ReoStar's assemblage of E&P assets allows for appreciable, unimpeded growth into the foreseeable future.

Additional information is located on the company's website: www.reostarenergy.com.

Certain statements in this news release may contain forward-looking information within the meaning of Rule 175 under the Securities Act of 1933 and Rule 3b-6 under the Securities Exchange Act of 1934, and are subject to the safe harbor created by those rules. All statements, other than statements of fact, included in this release, including, without limitation, statements regarding potential future plans and objectives of the company, are forward-looking statements that involve risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Technical complications which may arise could prevent the prompt implementation of any strategically significant plan(s) outlined above.

Contact Information

  • Contact:
    ReoStar Energy Corporation
    Teresa Wright
    817-546-7718