WESTMINSTER, Colo., April 17, 2012 (GLOBE NEWSWIRE) -- Arete Industries, Inc. (OTCQB:ARET), announces revenue for the fiscal year ended December 31, 2011 of $3.5 million. During the fiscal year, oil sales totaled $783,491, natural gas sales totaled $221,658 gas gathering income totaled $45,638 and the sale of oil & gas properties $2,479,934.
These production figures took place over a five month period, from July 29th, 2011 through December 31, 2011. On July 29, 2011, Arete entered into a purchase and sale agreement which resulted in the acquisition of oil and gas properties in Wyoming, Colorado, Kansas and Montana. Prior to this date, the Company did not have any "oil and gas producing activities". Arete's oil sales are primarily attributable to its properties in Kansas and Wyoming. Production taxes were approximately 9% of oil and gas sales for the five-month period.
Highlights from 2011
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Arete was profitable during 2011. Net income for the fiscal year ended December 31, 2011 was $495,266 which includes $391,606 interest expense, income from extinguishment of debt income and interest income of $112,994.
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Arete produced 9,990 barrels of oil during the fiscal year ended December 31st, 2011 and 38,477 Mcf of natural gas during the fiscal year ended December 31st, 2011.
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Arete reported 2011 average monthly production of 3,626 barrels of oil equivalent (BBLe).
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One of the properties purchased on July 29, 2011 was sold to an unrelated purchaser on August 23, 2011. Pursuant to the Amended Agreement for "Arete's purchase of the properties, Arete received $5,101,047 of the net proceeds from this sale which resulted in a gain of $2,479,934.
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As of December 31, 2011, Arete reported a pre-tax PV-10 value of $10.865 million.
- The Company had a stockholder's equity at December 31, 2011 of $6,978,041. This is compared to stockholder's (deficit) at December 31, 2010 of ($1,832,847).
Donald W. Prosser, CEO of Arete Industries stated: "We are proud of all of the significant progress we have made during 2011. We intend to continue to execute on our business model, which is focused on purchasing assets that no one else wants, drilling and getting production out of our leases and generating cash flows that have value, and selling to make profits on things Arete wouldn't be able to drill."
General and administrative expenses increased by $1,016,309 in 2011 compared to 2010. This increase was primarily due to increases in acquisition investigation and due diligence costs of $492,529; investor relations of $170,814; legal, auditing and transfer agent costs of $167,899; and consulting fees of $104,250.
Net income from operations for the fiscal year ended December 31, 2011 was $774,578 as compared to a net loss from operations of $927,304 for the fiscal year ended December 31, 2010. Net income for the fiscal year ended December 31, 2011 was $495,266 which includes $391,606 interest expense, income from extinguishment of debt income and interest income of $112,994 as compared to a net loss of $852,612 for the fiscal year ended December 31, 2010, which includes $47,191 interest expense, income from extinguishment of debt income and interest income of $121,883.
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About Arete Industries
The Company holds oil and gas properties in the Rocky Mountain Region of the United States and operates a small natural gas gathering system. For additional information on the Company visit our website at http://www.areteindustries.com/
For additional information on Arete Industries visit the Company's new website at: http://www.AreteIndustries.com/
SAFE HARBOR
This press release contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933 and the Securities Exchange Act of 1934. All statements other than statements of historical facts included in this report, such as statements regarding our future expectations to increase our production are forward-looking statements (often, but not always, using words such as "expects", "anticipates", "plans", "estimates", "potential", "possible", "probable", or "intends", or stating that certain actions, events or results "may", "will", "should", or "could" be taken, occur or be achieved). Forward-looking statements are based on our current expectations and assumptions about future events and involve inherent risks and uncertainties. These risks include, but are not limited to, the volatility in commodity prices for crude oil and natural gas, the presence or recoverability of estimated reserves, the ability to replace reserves, environmental risks, drilling and operating risks, exploration and development risks, competition and government regulation or other actions. Additional information on these and other factors which could affect Arete's operations or financial results are included in Aretes' reports on file with the Securities and Exchange Commission. Such factors (many of which are beyond our control) could cause actual results to differ materially from those set forth in the forward-looking statements.. Readers should not place undue reliance on any such forward-looking statements, which are made only as of the date hereof. Arete undertakes no duty or obligation to update any forward-looking statements contained in this release as a result of new information, future events or changes in Arete's expectations.
| ARETE INDUSTRIES, INC. AND SUBSIDIARIES | ||
| CONSOLIDATED BALANCE SHEETS | ||
| December 31, 2010 and 2011 | ||
| ASSETS | 2010 | 2011 |
| Current Assets: | ||
| Cash and equivalents | $ 15,990 | $ 219,566 |
| Receivable from DNR Oil & Gas, Inc.: | ||
| Oil and gas sales, net of production costs | -- | 165,283 |
| Other | 12,625 | 15,597 |
| Prepaid expenses and other | 85,139 | 207,338 |
| Total Current Assets | 113,754 | 607,784 |
| Property and Equipment: | ||
| Oil and gas properties, at cost, successful efforts method: | ||
| Proved properties | -- | 9,056,032 |
| Unevaluated properties | -- | 287,728 |
| Natural gas gathering system | 442,195 | 442,195 |
| Furniture and equipment | 19,662 | 22,522 |
| Total property and equipment | 461,857 | 9,808,477 |
| Less accumulated depreciation, depletion and amortization | (184,121) | (525,154) |
| Net Property and Equipment | 277,736 | 9,283,323 |
| TOTAL ASSETS | $ 391,490 | $ 9,891,107 |
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||
| Current Liabilities: | ||
| Accounts payable: | ||
| Payable to DNR Oil & Gas, Inc.: | ||
| Oil and gas property acquisition costs | $ -- | $ 826,791 |
| Gas gathering operating costs | 402,558 | 416,835 |
| Operator fees and other | 117,518 | 151,748 |
| Unrelated parties | 60,029 | 92,019 |
| Notes and advances payable: | ||
| Directors | 704,475 | 109,319 |
| Unrelated parties | -- | 250,000 |
| Accrued interest expense | 152,943 | 88,303 |
| Director fees payable | 98,000 | 90,000 |
| Commissions payable for private placement of preferred stock | -- | 105,000 |
| Accrued payroll taxes | 111,690 | -- |
| Accrued consulting services payable in common stock | 536,528 | 18,750 |
| Current portion of asset retirement obligations | -- | 15,398 |
| Other accrued costs and expenses | 40,596 | 111,061 |
| Total Current Liabilities | 2,224,337 | 2,275,224 |
| Asset Retirement Obligations, net of current portion | -- | 637,842 |
| Total Liabilities | 2,224,337 | 2,913,066 |
| Commitments and Contingencies (Notes 3, 4 and 10) | ||
| Stockholders' Equity (Deficit) | ||
|
Convertible Class A preferred stock; $10,000 face value per share, authorized 1,000,000 shares: |
||
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Series 1; authorized 30,000 shares, issued and outstanding no shares in 2010 and 522.5 shares in 2011, liquidation preference of $5,421,000 in 2011 |
-- | 5,023,371 |
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Series 2; authorized 2,500 shares, issued and outstanding no shares in 2010 and 2011 |
-- | -- |
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Common stock, no par value; authorized 499,000,000 shares, issued and outstanding 4,972,635 in 2010 and 7,764,476 in 2011 |
13,611,903 | 16,904,154 |
| Accumulated deficit | (15,444,750) | (14,949,484) |
| Total Stockholders' Equity (Deficit) | (1,832,847) | 6,978,041 |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $ 391,490 | $ 9,891,107 |
| The Accompanying Notes are an Integral Part of These Financial Statements. | ||
| ARETE INDUSTRIES, INC. AND SUBSIDIARIES | ||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||
| Years Ended December 31, 2010 and 2011 | ||
| 2010 | 2011 | |
| Revenues: | ||
| Oil and natural gas sales | $ -- | $ 1,005,149 |
| Gain of sale of oil and natural gas properties | -- | 2,479,934 |
| Gas gathering income | 167,625 | 45,638 |
| Total revenues | 167,625 | 3,530,721 |
| Operating Expenses: | ||
| Oil and gas producing activities: | ||
| Lease operating expenses | -- | 449,854 |
| Production taxes | -- | 89,109 |
| Depreciation, depletion, amortization and accretion | -- | 310,308 |
| Gas gathering: | ||
| Cost of operations: | ||
| Related Party | 104,606 | 30,815 |
| Unrelated parties | 222,985 | 92,420 |
| Depreciation | 44,229 | 44,219 |
| General and administrative expenses: | ||
| Director fees | 100,450 | 120,000 |
| Investor relations | 138,889 | 309,703 |
| Acquisition investigation and due diligence | 22,050 | 514,579 |
| Legal, auditing and transfer agent | 30,974 | 198,873 |
| Accounting, financial reporting and rent- related party | 53,000 | 83,802 |
| Consulting fees: | ||
| Related parties | 122,500 | 167,500 |
| Unrelated parties | 238,700 | 297,950 |
| Office, travel and other | 16,546 | 46,441 |
| Depreciation | -- | 570 |
| Total operating expenses | 1,094,929 | 2,756,143 |
| Operating income (loss) | (927,304) | 774,578 |
| Other income (expense): | ||
| Gain on extinguishment of debt | 121,870 | 111,690 |
| Interest income | 13 | 604 |
| Interest expense | (47,191) | (391,606) |
| Total other income (expense) | 74,692 | (279,312) |
| Income (loss) before income taxes | (852,612) | 495,266 |
| Income tax benefit (expense) | -- | -- |
| Net income (loss) | $ (852,612) | $ 495,266 |
| Net Income (Loss) Applicable to Common Stockholders: | ||
| Net income (loss) | $ (852,612) | $ 495,266 |
| Accrued Preferred stock dividends | -- | (196,000) |
| Net income (loss) applicable to common stockholders | $ (852,612) | $ 299,266 |
| Earnings (Loss) Per Share Applicable to Common Stockholders: | ||
| Basic | $ (0.17) | $ 0.04 |
| Diluted | $ (0.17) | $ 0.04 |
| Weighted Average Number of Common Shares Outstanding: | ||
| Basic | 4,950,000 | 6,875,000 |
| Diluted | 4,950,000 | 6,875,000 |
| The Accompanying Notes are an Integral Part of These Financial Statements. | ||
| ARETE INDUSTRIES, INC. AND SUBSIDIARIES | ||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| For the Years Ended December 31, 2010 and 2011 | ||
| 2010 | 2011 | |
| Cash Flows from Operating Activities: | ||
| Net income (loss) | $ (852,612) | $ 495,266 |
| Adjustments to reconcile net inome (loss) to net cash used in operating activities: | ||
| Depreciation, depletion and amortization | 44,229 | 341,033 |
| Accretion of discount on asset retirement obligations | 14,064 | |
| Common stock issued in exchange for services | 573,889 | 1,235,973 |
| Gain on extinguishment of debt | (121,869) | (111,690) |
| Gain on sale of oil and gas properties | -- | (2,479,934) |
| Changes in operating assets and liabilities: | ||
| Accounts receivable | 9,068 | (183,979) |
| Prepaid expenses and other | -- | (122,199) |
| Accounts payable | 110,552 | 59,397 |
| Accrued costs and expenses | 23,619 | (2,175) |
| Net cash used in operating activities | (213,124) | (754,244) |
| Cash Flows from Investing Activities: | ||
| Capital expenditures for oil and gas properties | -- | (1,128,810) |
| Purchase of furniture and equipment | -- | (2,860) |
| Net cash used in investing activities | -- | (1,131,670) |
| Cash Flows from Financing Activities: | ||
| Proceeds from notes and advance payable | 215,000 | 2,064,100 |
| Principal payments on notes payable | (2,650) | (5,306,481) |
| Proceeds from sale of common stock | -- | 203,500 |
| Proceeds from sale of preferred stock | -- | 5,225,000 |
| Offering costs related to private placement of preferred stock | -- | (96,629) |
| Net cash provided by financing activities | 212,350 | 2,089,490 |
| Net increase (decrease) in cash and equivalents | (774) | 203,576 |
| Cash and equivalents, beginning of year | 16,764 | 15,990 |
| Cash and equivalents, end of year | $ 15,990 | $ 219,566 |
| Supplemental Disclosure of Cash Flow Information: | ||
| Cash paid for interest | $ 10,848 | $ 319,246 |
| Cash paid for income taxes | $ -- | $ -- |
| Supplemental Disclosure of Non-cash Investing and Financing Activities: | ||
| Conversion of notes payable to 897,500 shares of common stock | $ -- | $ 1,335,000 |
| Note payable for acquisition of oil and gas properties | $ -- | $ 10,100,000 |
| Proceeds from sale of oil and gas property applied to note payable | $ -- | $ 5,101,047 |
| Pre-acquisition oil and gas sales applied to note payable | $ -- | $ 766,728 |
| Non-interest bearing payable for acquisition of oil and gas properties | $ -- | $ 826,791 |
| Asset retirement obligations incurred on acquisition of oil and gas properties | $ -- | $ 639,176 |
| The Accompanying Notes are an Integral Part of These Financial Statements. | ||