Cano Petroleum Posts 2Q 2010 Results

Cano Petroleum announced that production for the quarter ended December 31, 2009 averaged 1,189 net barrels of equivalent oil per day. This is 1.2% lower as compared to production of 1,203 net BOEPD for the quarter ended December 31, 2008 (“Prior Year Quarter”) and 2.4% lower as compared to production of 1,218 net BOEPD for the quarter ended September 30, 2009. Production for the six-month period ended December 31, 2009 (“Current Six Months”) of 1,204 net BOEPD was 1.1% lower as compared to the six-month period ended December 31, 2008 (“Prior Year Six months”) of 1,218 net BOEPD. Factors decreasing production for the Current Quarter include: (i) a 50 BOEPD temporary reduction to redistribute water injection at the Cato waterflood to enlarge the waterflood “footprint”, and (ii) a 22 BOEPD reduction due to curtailed Barnett Shale natural gas production at our Desdemona Properties. Otherwise, normal field declines of production were more than offset by consistent and increasing performance at waterfloods from both our Cato and Panhandle Properties.

For the Current Quarter, we had a loss applicable to common stock of $8.9 million, which was a $22.6 million decrease as compared to the Prior Year Quarter of $13.7 million income applicable to common stock. Items contributing to the $22.6 million earnings decrease were reduced gain on derivatives of $26.0 million, lower income from discontinued operations of $12.2 million and decreased income from the preferred stock repurchased for less than the carrying amount of $10.9 million. Partially offsetting the earnings decrease were lower operating expenses of $24.6 million and higher operating revenues of $1.2 million. The $24.6 million reduction in operating expenses is primarily attributable to a $22.4 million charge for impairment of long-lived assets in the Prior Year Quarter.

For the Current Six Months, we had a loss applicable to common stock of $12.9 million, which was a $38.4 million decrease as compared to the $25.5 million income applicable to common stock incurred for the Prior Year Six Months. Items contributing to the $38.4 million earnings decrease were reduced gain on derivatives of $50.2 million, lower income from discontinued operations of $11.4 million, decreased income from the preferred stock repurchased for less than the carrying amount of $10.9 million and lower operating revenues of $4.4 million. Partially offsetting the earnings decrease were lower operating expenses of $27.0 million, which is primarily attributable to a $22.4 million charge for impairment of long-lived assets in the Prior Year Quarter.

For the Current Quarter, our LOE per produced BOE was $37.12, which is an improvement of $6.94 as compared to $44.06 for the Prior Year Quarter. For the Current Six Months, our LOE per produced BOE was $37.93, which is an improvement of $6.92 as compared to $44.86 for the Prior Year Six Months. We expect LOE to decrease during the 2010 fiscal year as we realize the continued benefit of lower service rates negotiated with vendors. Additionally, we expect LOE per BOE to decrease as production increases from the waterflood and enhanced oil recovery development activities we have implemented and are currently implementing.


 

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