-- 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