WESTMINSTER, Colo., May 16, 2012 (GLOBE NEWSWIRE) -- Arete Industries, Inc. (OTCQB:ARET), announces revenue for the first quarter ended March 31, 2012 of $1.087 million. During the quarter, oil and gas sales totaled $554,035 and oil and gas property net sales totaled $533,048.
Oil sales were primarily attributable to its properties in Kansas and Wyoming. The average oil price for the first quarter of 2012 was $89.34 per barrel but ranged from a low of $88.24 for January to a high of $91.08 for February. Average natural gas price, including proceeds from sales of natural gas liquids, amounted to $4.53 per Mcf for the first quarter of 2012 but ranged from a low of $4.25 per Mcf for February to a high of $4.80 per Mcf for January. Production taxes were approximately 8% of its oil and gas sales for the first quarter of 2012. Lease operating expense averaged $32.06 per Barrel of Oil Equivalent ("BOE").
During the first quarter of 2012, Arete sold one of its properties with a 100% working interest in a producing oil and gas well, which resulted in gross proceeds of approximately $1,109,000. This sale resulted in a gain of approximately $533,000. Arete expects to periodically evaluate its portfolio of properties and sell additional properties if it believes a sale can be completed on terms that provide attractive returns.
Highlights from the First Quarter 2012:
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Arete was profitable during the first quarter 2012. Net income for the quarter ended March 31, 2012 was $274,898 or $0.04 per share, compared to a net loss of $453,678 or ($0.09) for the quarter ended March 31, 2011.
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Arete reported positive cash flow from operations of $78,455 during the first quarter 2012, compared to a negative cash flow used for operations of $308,800 during the first quarter 2011.
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Arete had cash and cash equivalents of approximately $632,000 as of March 31, 2012.
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Arete reported 5,044 barrels of oil and 22,830 Mcf of natural gas was sold during the first quarter ended March 31, 2012.
- Arete reported 8,850 barrels of oil equivalent (BBLe) was sold during the quarter ended March 31, 2012.
Don Prosser, CEO of Arete Industries stated: "We are very pleased with the results achieved during the first quarter of 2012. We intend to continue to execute on our business model, which is focused on purchasing oil and gas assets at below market prices, drilling and increasing production out of leases to generate cash flows, and selling oil and gas assets for a profits when the Company doesn't intend to drill them."
General and administrative expenses decreased by $72,152 in 2012 compared to 2011. This decrease was primarily due to decreases in investor relations of $94,736, and acquisition investigation and due diligence costs of $27,500. These decreases were offset by increases in consulting expense with related parties of $44,375, and accounting and financial reporting with a related party of $8,208.
Income from operations for the first quarter of 2012 was $292,588 compared to a loss of ($442,073) for the first quarter of 2011. The improvement of approximately $735,000 was primarily due to the gain on sale of oil and gas properties of $533,048, as well as $554,035 in oil and natural gas operations, and a $72,152 reduction general and administrative expenses. As of March 31, 2012, the Company had cash and equivalents of approximately $632,000.
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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: 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 Arete's 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 | ||
| UNAUDITED CONSOLIDATED BALANCE SHEETS | ||
| December 31, 2011 and March 31, 2012 | ||
| ASSETS | 2011 | 2012 |
| Current Assets: | ||
| Cash and equivalents | $ 219,566 | $ 631,756 |
| Receivable from DNR Oil & Gas, Inc.: | ||
| Oil and gas sales, net of production costs | 165,283 | 163,111 |
| Other | 15,597 | 26,471 |
| Prepaid expenses and other | 207,338 | 169,432 |
| Total Current Assets | 607,784 | 990,770 |
| Property and Equipment: | ||
| Oil and gas properties, at cost, successful efforts method: | ||
| Proved properties | 9,056,032 | 8,749,536 |
| Unevaluated properties | 287,728 | 291,776 |
| Natural gas gathering system | 442,195 | 442,195 |
| Furniture and equipment | 22,522 | 22,522 |
| Total property and equipment | 9,808,477 | 9,506,029 |
| Less accumulated depreciation, depletion and amortization | (525,154) | (661,659) |
| Net Property and Equipment | 9,283,323 | 8,844,370 |
| TOTAL ASSETS | $ 9,891,107 | $ 9,835,140 |
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | 2011 | 2012 |
| Current Liabilities: | ||
| Accounts payable: | ||
| Payable to DNR Oil & Gas, Inc.: | ||
| Oil and gas property acquisition costs | $ 826,791 | $ 250,000 |
| Gas gathering operating costs | 416,835 | 436,403 |
| Operator fees and other | 151,748 | 151,748 |
| Unrelated parties | 92,019 | 29,297 |
| Preferred stock dividends payable | -- | 391,875 |
| Notes and advances payable: | ||
| Directors and affiliates | 109,319 | 235,069 |
| Unrelated parties | 250,000 | 250,000 |
| Accrued interest expense | 88,303 | 99,109 |
| Director fees payable | 90,000 | 120,000 |
| Finders fee payable for private placement of preferred stock | 105,000 | 105,000 |
| Accrued consulting services payable in common stock | 18,750 | 63,750 |
| Current portion of asset retirement obligations | 15,398 | 15,421 |
| Other accrued costs and expenses | 111,061 | 202,930 |
| Total Current Liabilities | 2,275,224 | 2,350,602 |
| Asset Retirement Obligations, net of current portion | 637,842 | 623,474 |
| Total Liabilities | 2,913,066 | 2,974,076 |
| Commitments and Contingencies (Notes 3, 9 and 10) | ||
| Stockholders' Equity (Deficit) | ||
| Convertible Class A preferred stock; $10,000 face value per share, authorized 1,000,000 shares: | ||
| 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 and $5,616,875 in 2012 | 5,023,371 | 5,023,371 |
| Series 2; authorized 2,500 shares, issued and outstanding no shares in 2010 and 2011 | -- | -- |
| Common stock, no par value; authorized 499,000,000 shares, issued and outstanding 4,972,635 in 2010 and 7,764,476 in 2011 | 16,904,154 | 16,904,154 |
| Accumulated deficit | (14,949,484) | (15,066,461) |
| Total Stockholders' Equity (Deficit) | 6,978,041 | 6,861,064 |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 9,891,107 | $ 9,835,140 |
| The Accompanying Notes are an Integral Part of These Financial Statements. | ||
| ARETE INDUSTRIES, INC. AND SUBSIDIARIES | ||
| UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS | ||
| Quarters Ended March 31, 2011 and 2012 | ||
| 2011 | 2012 | |
| Revenues: | ||
| Oil and natural gas sales | $ -- | $ 554,035 |
| Sale of oil and natural gas properties | -- | 533,048 |
| Gas gathering income | 29,656 | -- |
| Total revenues | 29,656 | 1,087,083 |
| Operating Expenses: | ||
| Oil and gas producing activities: | ||
| Lease operating expenses | -- | 283,709 |
| Production taxes | -- | 44,196 |
| Depreciation, depletion, amortization and accretion | -- | 131,107 |
| Gas gathering: | ||
| Cost of operations: | ||
| Related Party | 20,611 | -- |
| Unrelated parties | 47,143 | 3,660 |
| Depreciation | 11,055 | 11,055 |
| General and administrative expenses: | ||
| Director fees | 30,000 | 30,000 |
| Investor relations | 140,540 | 45,804 |
| Acquisition investigation and due diligence | 27,500 | -- |
| Legal, auditing and transfer agent | 43,539 | 49,080 |
| Accounting, financial reporting and rent- related party | 27,542 | 35,750 |
| Consulting fees: | ||
| Related parties | 30,625 | 75,000 |
| Unrelated parties | 76,450 | 71,445 |
| Office, travel and other | 16,724 | 13,546 |
| Depreciation | -- | 143 |
| Total operating expenses | 471,729 | 794,495 |
| Operating income (loss) | (442,073) | 292,588 |
| Other income (expense): | ||
| Gain on extinguishment of debt | -- | -- |
| Interest income | 140 | 155 |
| Interest expense | (11,745) | (17,845) |
| Income (loss) before income taxes | (453,678) | 274,898 |
| Income tax benefit (expense) | -- | -- |
| Net income (loss) | $ (453,678) | $ 274,898 |
| Net Income (Loss) Applicable to Common Stockholders: | ||
| Net income (loss) | $ (453,678) | $ 274,898 |
| Accrued preferred stock dividends | -- | (195,875) |
| Net income (loss) applicable to common stockholders | $ (453,678) | $ 79,023 |
| Earnings (Loss) Per Share Applicable to Common Stockholders: | ||
| Basic | $ (0.09) | $ 0.01 |
| Diluted | $ (0.09) | $ 0.01 |
| Weighted Average Number of Common Shares Outstanding: | ||
| Basic | 4,970,000 | 7,764,000 |
| Diluted | 4,970,000 | 7,764,000 |
| The Accompanying Notes are an Integral Part of These Financial Statements. | ||
| ARETE INDUSTRIES, INC. AND SUBSIDIARIES | ||
| UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| Quarters Ended March 31, 2011 and 2012 | ||
| 2011 | 2012 | |
| Cash Flows from Operating Activities: | ||
| Net income (loss) | $ (453,678) | $ 274,898 |
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
| Depreciation, depletion and amortization | 11,055 | 140,239 |
| Accretion of discount on asset retirement obligations | -- | 2,066 |
| Gain on sale of oil and gas properties | -- | (533,048) |
| Changes in operating assets and liabilities: | ||
| Accounts receivable | 3,908 | 24 |
| Prepaid expenses and other | -- | 38,656 |
| Accounts payable | (34,800) | (22,054) |
| Accrued costs and expenses | 164,715 | 177,675 |
| Net cash provided by (used in) operating activities | (308,800) | 78,455 |
| Cash Flows from Investing Activities: | ||
| Capital expenditures for oil and gas properties | -- | (617,270) |
| Proceeds from sale of oil and gas properties | -- | 1,108,709 |
| Contingent consideration paid to DNR under sharing arrangement | -- | (282,704) |
| Net cash provided by investing activities | -- | 208,735 |
| Cash Flows from Financing Activities: | ||
| Proceeds from notes and advance payable | 620,000 | 375,000 |
| Principal payments on notes payable | (4,966) | (250,000) |
| Net cash provided by financing activities | 615,034 | 125,000 |
| Net increase (decrease) in cash and equivalents | 306,234 | 412,190 |
| Cash and equivalents, beginning of period | 15,990 | 219,566 |
| Cash and equivalents, end of period | $ 322,224 | $ 631,756 |
| Supplemental Disclosure of Cash Flow Information: | ||
| Cash paid for interest | $ 13,438 | $ 20,000 |
| Cash paid for income taxes | $ -- | $ -- |
| Supplemental Disclosure of Non-cash Investing and Financing Activities: | ||
| Preferred stock dividends declared | $ -- | $ 391,875 |
| Asset retirement obligations assumed upon sale of oil and gas properties | $ -- | $ 16,411 |
| The Accompanying Notes are an Integral Part of These Financial Statements. | ||