IRVINE, Calif., May 22, 2012 (GLOBE NEWSWIRE) -- Universal Bioenergy Inc., (OTCMarkets:UBRG), a publicly traded independent diversified energy company, that markets natural gas, propane, and produces petroleum and coal, announced that it has filed its First Quarter Report on Form 10-Q for the period ending March 31, 2012 with the Securities and Exchange Commission. The annual report contains the Company's audited financial statements, management's discussion and analysis (MD&A), its plans and future outlook and other disclosures. The following information was excerpted from the Form 10-Q Report.
Results of Operations
Revenues
Our revenues for the three months period ended March 31, 2012 declined due to the following conditions in the U.S. energy market;
According to the Energy Information Administration, the warm weather this past winter had resulted in natural gas working inventories that set new record seasonal highs, with February 2012 ending at an estimated 2.44 trillion cubic feet (Tcf), about 41 percent above the same time last year. EIA's average 2012 Henry Hub natural gas spot price forecast is $3.17 per million British thermal units (MMBtu), a decline of about $0.83 per MMBtu from the 2011 average spot price. EIA expects that Henry Hub spot prices will average $3.96 per MMBtu in 2013.
According to Bloomberg / Business Week, "The price of natural gas is at a 10-year low after a surprising jump in supplies. But the government says natural gas inventories expanded more than expected following a recent production boom. Supplies are currently 59 percent above the five-year average, and they're expected to keep growing over the next few months."
Our primary revenues from this period are from the sale of natural gas and propane. Our revenues for the three months ended March 31, 2012 were $13,007,160 as compared to $22,247,354 for the same period in 2011. This resulted in a decrease of $9,240,194 in revenues or 41.53% over the previous year. Our Cost of Sales for this period was $12,989,939. This has resulted in a gross profit margin for this period of $17,220. The high proportionate cost of sales relative to the gross revenues, reflected in this period, is due to purchasing the gas from some of the suppliers at near retail cost, and high financing costs added to the gas by the suppliers.
We incurred losses of $654,630 for the three months ended March 31, 2012 and $577,034 for the same period in 2011. Our accumulated deficit since our inception through March 31, 2012 amounts to $19,545,000. We issued 227,925 of common shares for services with an aggregate fair value of approximately $5,000 that was included in the $430,385 in general and administrative expenses for the three month period ended March 31, 2012. Excluding the value of the common shares of $5,000 from the general and administrative expenses of $430,385 would reduce the actual net G&A expenses to $425,385. We also incurred interest expenses of $277,557. Excluding the value of the common stock that was issued for services, and interest expenses which together totaled $282,557, would correspondingly reduce our net loss of $430,385 to an adjusted net loss of $147,828 for the period ending March 31, 2012. Based on an adjusted net loss of $147,828, this loss equals only 1.13% of our total revenues of $13,007,160 for the period ended March 31, 2012, as compared to 0.44% for the same period ended 2011.
Operating Costs and Expenses
Our Cost of Sales for the three months ended March 31, 2011 were $12,989,939 as compared to $22,219,582 for the same period in 2011. Our primary operation is the marketing of natural gas and propane to our major customers nationwide. Our operating expenses for the three months ended March 31, 2012 were $440,541 as compared to $337,088 for the same period in 2011. We pay our employees and consultants largely in common shares as our cash availability is currently limited.
We increased our total operating expenses from $337,088 for the period ending 2011, by a total of $103,453, or by 27.43%, to $440,541 for the period ending March 31, 2012. Based on our plans for growth and expansion, and increasing revenues through sales of natural and other products, we believe we will continue the trend to reduce our net losses down to zero, and then move our company toward solid profitability.
Assets
Our "total assets" have increased by $866,712, or 19.84% to $5,234,529 for the period ending March 31, 2012, compared to $4,367,817 for the same period in 2011. A total of $866,712 was primarily from our investment in the Whitesburg Friday Branch Mine LLC acquisition, which was also offset from a reduction in the amount of our Accounts Receivables from the sales of natural gas due to the unseasonably warm winter on the east coast, a reduced demand in natural gas for heating, a decline in natural gas prices, and an increase in natural gas working inventories. Our Property and Equipment and long-term physical assets were also reduced by $127,147 due to the discontinued operations of our biodiesel refinery in Nettleton, Mississippi. However, this reduction in our "total assets", was offset somewhat by an increase in our investment in the Whitesburg Friday Branch Mine, LLC acquisition. Oil and gas companies generally book their inventories and supplies of oil and gas reserves as assets on their balance sheets, since these are very valuable assets owned by the company.
Cash Flows
The prices and margins in the energy industry are normally volatile, and are driven to a great extent by market forces over which we have no control. Taking into consideration other extenuating factors, as these prices and margins fluctuate, this would result in a corresponding change in our revenues and operating cash flows. Our cash flows for the nine months ended March 31, 2012 and 2011 were as follows:
Our cash used in operating activities for the three months ended March 31, 2012 was $291,535 as compared to ($44,080) for the three months ended March 31, 2011. The decrease was primarily attributable to the accruing certain management salaries, issuing stock for professional services in lieu of cash payments and the reduction of Notes payable and interest with stock in lieu of cash payments.
Cash used in investing activities for the three months ended March 31, 2012 was $0.00 as compared to cash provided by investing activities of $139,500 for the three months ended March 31, 2011.
Our cash provided by financing activities for the three months ended March 31, 2012 was $309,980 as compared to $197,300 for the three months ended March 31, 2011. The net cash provided by financing activities is primarily attributable to our Notes Payables.
Liabilities
Current liabilities decreased to $2,991,261 for the three months ended March 31, 2012, compared to $4,371,869 for the same period in 2011. This 31.58% decrease was primarily due to a $1,802,469 decrease in accounts payable from the purchasing costs and supplies of natural gas. Our long term liabilities are $1,392,487 for the period ending March 31, 2012, compared to $248,912 for the three months ending March 2011. This increase was primarily due to the conversion of the accrued compensation and expenses of certain officers and employees into long term notes payable, to reduce our current liabilities, improve our cash flow, and improve the Balance Sheet.
Short-Term Outlook for Natural Gas
On March 6, 2012 the U.S. Energy Information Administration ("EIA") released its "Short-Term Energy Outlook". The EIA expects that natural gas consumption will average 68.9 billion cubic feet per day (Bcf/d) in 2012, an increase of 2.1 Bcf/d (3.1 percent) from 2011. The EIA expects that large gains in electric power use will offset declines in residential and commercial use. Consumption in the electric power sector peaks in the third quarter of 2012, when electricity demand for air conditioning is highest. The EIA projects that growth in total natural gas consumption continues into 2013, with forecast consumption averaging 69.3 Bcf/d. Consumption in the residential and commercial sectors increases in 2013 because of the forecast return to near-normal temperatures next winter. EIA expects that Henry Hub spot prices will average $3.96 per MMBtu in 2013.
Universal's President Vince M. Guest says, "With the price of natural gas hitting 10 years lows, the unseasonably warm winter, and high supplies of natural gas working inventories, these factors have had a major negative impact on the revenues and profits of nearly all companies in the natural gas energy market this first quarter. Although our revenues are down this quarter, due to these factors also, we are still very bullish on the future of natural gas. Generally, the demand for natural gas increases during the winter months, however, that was not the case this past winter. With the future of natural gas projected to increase in the third quarter along with our gas storage, transportation, coal mining operations and other planned acquisitions, we believe this will have a positive effect on our future revenues and earnings. Our major goal for 2012 to solid generate earnings, and bring greater value to our shareholders."
The full Form 10-Q Quarterly Report is available for viewing on the SEC's website and it is also available at our website at www.universalbioenergy.com Investor Relations, SEC Filings section.
About Universal Bioenergy Inc.
Founded in 2004, Universal Bioenergy Inc., is a publicly traded independent diversified energy company that produces and markets natural gas, petroleum, coal and propane. We market energy resources to the largest public utilities, electric power producers and local gas distribution companies in the U.S., that serve millions of commercial, industrial and residential customers. We are also engaged in the acquisition and development of existing or recently discovered oil and gas fields, leases and surface coal mines. For more information visit www.universalbioenergy.com
The Universal Bioenergy Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6784
Safe Harbor Statement - There are matters discussed in this media information that are forward looking statements 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. Such statements are only forecasts and actual events or results may differ materially from those discussed. For a discussion of important factors which could cause actual results to differ from the forward looking statements, refer to Universal Bioenergy Inc.'s most recent annual report and accounts and other SEC filings. The company undertakes no obligation to update publicly, or revise, forward looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required.