TYLER, Texas, April 8, 2010 (GLOBE NEWSWIRE) -- Pegasi Energy Resources Corp. (OTCBB:PGSI), an East Texas based oil and gas exploration and production company headquartered in Tyler Texas today released the results of operations for calendar year 2009.
The Company filed a complete form 10(K) with the Securities and Exchange Commission and a copy of that filing can be found at www.sec.gov.
Highlights from the filing include:
- Total revenues of $1,006,000, down from $2,601,000 reported in 2008. The drop in revenues is attributable to the dramatic drop in the price received for both natural gas and crude oil. For the year ended December 31, 2009 the average price for natural gas was $3.25 per mcf (thousand cubic feet) compared to $7.95 per mcf for the year ended December 31, 2008. The price received for crude oil for 2009 was $56.62 per barrel compared to an average of $100.76 for the prior year.
- Net gas production for the year ended December 31, 2009 increased to 64 Mmcf (million cubic feet) compared to 63 Mmcf for the prior year.
- Crude oil production decreased slightly to 5,719 barrels for 2009 compared to 7,429 for 2008.
- Total operating expenses for the year ended December 31, 2009 to $3.35 million from $4.18 million for the year ended December 31, 2008.
- General and administrative (G&A) costs for the year ended December 31, 2009 decreased slightly to $2.2 million from $2.55 million reported for the prior year.
Complete financial table can be found at the end of this press release.
Reserves
The Company reported total net proved reserves in their Cornerstone project of 32.36 Bcfe (billion cubic feet equivalent) as of December 31, 2009. This compared to 33.7 Bcfe (net) reported on December 31, 2008, a modest decline of 3.7% after producing 64 Mmcf of gas and 5,719 barrels of oil during the year. The Company has an 80% working interest in the Cornerstone project which is located in NE Texas in Marion and Cass Counties.
Total gross proved reserves as of December 31, 2009 for the Cornerstone project are 40.45 Bcfe and total gross probable reserves are 24 Bcfe. The reserve report was prepared by James Smith and Associates, an independent third party petroleum engineering firm.
The proven reserves are calculated at a six to one ratio of gas to oil used to equate an equal BCFE to the previous year. With the current ratio closer to twenty one to one, we feel the reserve calculation is very conservative.
The Cornerstone project has produced over 400 million barrels of oil and 2.3 trillion cubic feet of gas, The Company is focused on applying new horizontal drilling and multistage frac technology to substantially increase the recovery of the substantial reserves which remain.
Management Comments
Mr. Michael Neufeld, President and CEO of Pegasi said; "Without doubt, 2009 was a difficult year for Pegasi Energy, as it was for most of the oil and gas industry. The dramatic drop in commodity prices received for the year and the resulting drop in revenues put a hold on our development plans for the Cornerstone project and prevented us from making any progress towards our goals. However, we've seen an improvement in prices in late 2009 and during the first quarter of 2010 which allows us to resume our development program." Mr. Neufeld went on to say; "Our main emphasis will be to develop our oil potential through horizontal drilling. A key element in our play is to maintain and add to our acreage position which we will do through agreements with industry partners. This has already been partially accomplished with two separate agreements with Oil and Gas companies for lease acquisition and renewal for a minimum of $4.7MM to a maximum of $8.7MM based on the companies paying for 100% of the cost for a 50% interest. We hope to double our present acreage position to 40,000 acres depending on competition." Continuing, Mr. Neufeld says, "We plan to do a small $1.5MM raise to drill several shallow gas plays which can quickly add to our cash flow. We currently have plans to begin a multi-well drilling program in the 2nd quarter of 2010. These will be vertical wells to develop PUD's and test the Travis Peak formation. We already have a commitment for 50% interest, on a promoted basis, in one well which will be extended to additional wells."
About Pegasi Energy Resources Corporation
Pegasi Energy Resources Corporation is an organic growth-oriented independent oil and gas exploration and production company, headquartered in Tyler, Texas. Pegasi is focused on a repeatable, low geological risk, high potential project in the active East Texas oil and gas region. The company's strategy is focused on establishing a portfolio of drilling opportunities to exploit undeveloped reserves to grow production, as well as undertaking exploration to grow future reserves. Additional information concerning Pegasi Energy is available at www.pegasienergy.com.
The Pegasi Energy Resources Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4682
Forward Looking Statements
Cautionary Note to U.S. Investors -- The United States Securities and Exchange Commission ("SEC") permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms in this press release, such as probable, possible and potential, that the SEC's guidelines strictly prohibit us from including in filings with the SEC. U.S. Investors are urged to consider closely the disclosure in our Form 8-K, filed with the SEC on March 24, 2009, available from us at our principal executive offices at 218 N. Broadway, Suite 204, Tyler Texas 75702. You can also obtain this form from the SEC by calling 1-800-SEC-0330.
The statements in this press release regarding Pegasi Energy's expectations with respect to the timing of testing and drilling operations, transportation of crude oil, and the construction of the pipeline, the ability of Pegasi Energy to plan a full field development, including additional drilling, facilities and pipeline to handle new production as appropriate through 2010, and the expectation as to sources of funding, are 'forward-looking statements' within the meaning of Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934. Although these forward-looking statements reflect the good faith judgment of management, forward-looking statements are inherently subject to known and unknown risks and uncertainties that may cause actual results to be materially different from those discussed in these forward-looking statements including, but not limited to, in the case of these forward-looking statements: unexpected delays in drilling or pipeline or other transportation infrastructure completion due to equipment failure or other unforeseen reasons; unforeseen events, such as unexpected difficulties in drilling or unexpected discoveries, may cause Pegasi Energy to reallocate resources, which may delay drilling, surveys, design plans, transportation infrastructure development and production or alter the mix of development drilling and exploration drilling in Pegasi Energy's portfolio; and unexpected costs may decrease funds available to carry out Pegasi Energy's plans described in this press release, which could delay or prevent execution of these plans. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. Pegasi Energy assumes no obligation to update these forward-looking statements to reflect any event or circumstance that may arise after the date of this release, other than as may be required by applicable law or regulation. Readers are urged to carefully review and consider the various disclosures, including the risk factors, made by Pegasi Energy in its reports filed with the Securities and Exchange Commission, in particular under the caption "Risk Factors" of its 8-K filed on March 24, 2009, which attempt to advise interested parties of the risks and factors that may affect Pegasi Energy's business. If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, Pegasi Energy's actual results may vary materially from those expected or projected.
| PEGASI ENERGY RESOURCES CORPORATION | ||
| CONSOLIDATED BALANCE SHEETS | ||
| December 31, | ||
| 2009 | 2008 | |
| Assets | ||
| Current assets: | ||
| Cash and cash equivalents | $127,176 | $792,255 |
| Accounts receivable, trade | 98,578 | 249,651 |
| Accounts receivable, related parties | 13,002 | 69,408 |
| Joint interest billing receivable, related parties, net | 17,983 | 58,249 |
| Other current assets | 128,483 | 166,972 |
| Total current assets | 385,222 | 1,336,535 |
| Property and equipment: | ||
| Equipment | 601,759 | 573,188 |
| Pipelines | 700,765 | 701,806 |
| Buildings | 19,916 | 19,916 |
| Leasehold improvements | 7,022 | 7,022 |
| Vehicles | 50,663 | 50,663 |
| Office furniture | 137,071 | 134,407 |
| Website | 15,000 | 15,000 |
| Total property and equipment | 1,532,196 | 1,502,002 |
| Less accumulated depreciation | (515,101) | (368,878) |
| Property and equipment, net | 1,017,095 | 1,133,124 |
| Oil and gas properties: | ||
| Oil and gas properties, proved | 11,928,985 | 11,905,413 |
| Oil and gas properties, unproved | 9,150,426 | 8,714,577 |
| Capitalized asset retirement obligations | 220,237 | 220,237 |
| Total oil and gas properties | 21,299,648 | 20,840,227 |
| Less accumulated depletion and depreciation | (900,275) | (806,303) |
| Oil and gas properties, net | 20,399,373 | 20,033,924 |
| Total assets | $21,801,690 | $22,503,583 |
| Liabilities and Stockholders' Equity | ||
| Current liabilities: | ||
| Accounts payable | $251,336 | $202,710 |
| Accounts payable, related parties | 874,076 | 684,996 |
| Revenue payable | 104,366 | 194,560 |
| Interest payable, related parties | 840,052 | 385,160 |
| Liquidated damages payable | 142,083 | 121,579 |
| Other payables | 35,795 | 54,061 |
| Current portion of notes payable | 6,570 | 6,575 |
| Current portion of notes payable, related parties | 6,352,303 | -- |
| Total current liabilities | 8,606,581 | 1,649,641 |
| Notes payable | 4,803 | 11,387 |
| Notes payable, related parties | -- | 4,857,303 |
| Asset retirement obligations | 300,311 | 283,307 |
| Total liabilities | 8,911,695 | 6,801,638 |
| Commitments and contingencies (Note 15) | ||
| Stockholders' equity: | ||
| Common stock: $0.001 par value; 75,000,000 shares authorized; 33,610,801 shares issued and outstanding | 33,611 | 33,611 |
| Additional paid-in capital | 19,673,102 | 19,673,102 |
| Accumulated deficit | (6,816,718) | (4,004,768) |
| Total stockholders' equity | 12,889,995 | 15,701,945 |
| Total liabilities and stockholders' equity | $21,801,690 | $22,503,583 |
| PEGASI ENERGY RESOURCES CORPORATION | ||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||
| Year Ended December 31, | ||
| 2009 | 2008 | |
| Revenues: | ||
| Oil and gas | $537,410 | $1,258,047 |
| Condensate and skim oil | 89,416 | 242,947 |
| Transportation and gathering | 246,264 | 842,278 |
| Saltwater disposal income | 133,028 | 257,964 |
| Total revenues | 1,006,118 | 2,601,236 |
| Operating expenses: | ||
| Lease operating expenses | 388,548 | 305,540 |
| Saltwater disposal expenses | 293,150 | 261,233 |
| Pipeline operating expenses | 78,746 | 171,892 |
| Cost of gas purchased for resale | 148,054 | 708,142 |
| Depletion and depreciation | 240,195 | 182,044 |
| General and administrative | 2,201,044 | 2,553,471 |
| Total operating expenses | 3,349,737 | 4,182,322 |
| Loss from operations | (2,343,619) | (1,581,086) |
| Other income (expenses): | ||
| Interest income | 2,431 | 73,814 |
| Interest expense | (456,719) | (364,775) |
| Dividend income | -- | 311 |
| Other income (expense) | (19,745) | 89,427 |
| Total other expenses | (474,033) | (201,223) |
| Loss before income tax benefit | (2,817,652) | (1,782,309) |
| Income tax benefit | 5,702 | 1,097,386 |
| Net loss | $(2,811,950) | $(684,923) |
| Basic and diluted loss per share | $(0.08) | $(0.02) |
| Weighted average shares outstanding | 33,610,801 | 30,361,295 |
| PEGASI ENERGY RESOURCES CORPORATION | ||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| Year Ended December 31, | ||
| 2009 | 2008 | |
| Operating Activities | ||
| Net loss | $(2,811,950) | $(684,923) |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||
| Depletion and depreciation | 240,195 | 182,044 |
| Accretion of discount on asset retirement obligations | 17,004 | 11,864 |
| Stock issued for legal services | -- | 77,000 |
| Deferred income taxes | -- | (1,097,934) |
| (Gain) loss from liquidated damages | 20,504 | (29,177) |
| Other | -- | (25,152) |
| Changes in operating assets and liabilities: | ||
| Accounts receivable, trade | 151,073 | 19,749 |
| Accounts receivable, related parties | 56,406 | 37,518 |
| Joint interest billing receivable, related parties, net | 40,266 | 64,293 |
| Other current assets | 38,489 | 155,138 |
| Accounts payable | 48,626 | (775,047) |
| Accounts payable, related parties | 209,080 | 104,901 |
| Revenue payable | (90,194) | 16,446 |
| Interest payable, related parties | 454,892 | 85,997 |
| Joint interest deposits, related parties | -- | (849,619) |
| Other payables | (18,266) | (3,781) |
| Net cash used in operating activities | (1,643,875) | (2,710,683) |
| Investing Activities | ||
| Purchases of property and equipment | (30,194) | (220,928) |
| Purchases of oil and gas properties | (459,421) | (4,466,400) |
| Net cash used in investing activities | (489,615) | (4,687,328) |
| Financing Activities | ||
| Proceeds from notes payable | -- | 9,521 |
| Payments on notes payable | (6,589) | (5,384) |
| Borrowings on notes payable, related party | 1,475,000 | -- |
| Payments on notes payable, related party | -- | (742,544) |
| Payments for cancelled shares of common stock1 | -- | (6,610) |
| Net cash provided by (used in) financing activities | 1,468,411 | (745,017) |
| Net decrease in cash and cash equivalents | (665,079) | (8,143,028) |
| Cash and cash equivalents at beginning of year | 792,255 | 8,935,283 |