Basic Earth Science Systems reported net income of $271,000, $.02 per share on a diluted basis, on revenue of $2.0 million for the second quarter of fiscal 2010, compared to net income of $946,000, $.05 per share, on revenue of $2.7 million for the same period in 2009. For the half fiscal year 2010, the Company reported net income of $520,000, $.03 per share on a diluted basis, on revenue of $3.5 million compared to net income of $2.3 million, $.13 per share, on revenue of $6.1 million for the same period in 2009.
"Similar to most energy companies, we were adversely impacted by declining oil and gas prices this year compared to last year," said Ray Singleton, President. "In the second quarter of fiscal 2010, Basic Earth sold 27,266 barrels of oil compared to 19,400 barrels in the prior year period, an increase of about 41%. However, the price we received per barrel decreased 46% from $115 to $63. Additionally, our gas production increased as well, but the price dropped by 70%. If prices were at the same level as a year ago, our revenue for this quarter would have been in the range of $3.4 to $3.6 million, significantly higher than the $2.0 million we reported."
For the six month period ended September 30, 2009, barrels of oil sold increased 19%, and gas production increased as well. However, gas production was skewed higher as prior period accruals were corrected to reflect actual volume sold. The amounts reported for the three month and six month periods, 84,140 Mcf and 119,326 Mcf, respectively, are not indicative of gas production going forward, and gas production is projected to be approximately 25,000 Mcf for the third quarter fiscal 2010.
Lifting costs for both the quarter and six months ended September 30, 2009, decreased 34% to $20 from $30 per barrel of oil equivalent and 31% to $20 from $29 per barrel of oil equivalent, respectively. The decrease was due to a number of factors including a higher level of oil and gas produced and fewer workover operations during the current periods.
Other factors affecting net income during the second quarter and six months of fiscal 2010 were an increase in depreciation and depletion due to an increase in the volume of oil and gas sold combined with the decrease in oil and gas reserve values resulting from lower prices for both commodities. Further, as a result of an increase in professional services, primarily legal fees, general and administrative expense increased for both the second quarter and six month period ended September 30, 2009.
During the second quarter fiscal 2010, Basic Earth reported that its newest horizontal Bakken well in Richland County, Mont., the Halvorsen-State 31x-36, began producing, and for the first two months of the second quarter fiscal 2010, the well produced 12,489 barrels of oil. Basic Earth's interest in the well is approximately 26%, and the well is operated by XTO Energy, Inc., Ft. Worth, Texas.
In September 2009, the Company announced that its Annual Meeting of Shareholders would be held on December 15, 2009. In conjunction with this, the Annual Report, Proxy and Proxy card were mailed on or around November 10, 2009, to shareholders of record as of October 23, 2009.
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