Resaca Releases '09 Financial, Operational Report
Resacan announced its interim results for the six months that ended December 31, 2009.
- Net production for the period averaged approximately 620 barrels of oil equivalent per day
- Current net production approximately 700 boe/d
- Production response from additional water injection at Cooper Jal
- Continued implementation of refrac program at Cooper Jal
- Expect to release December 31, 2009 reserve estimate March 31, 2009
- Oil and gas revenues of $7.1 million
- Unrealized loss from hedging activities of $1.6 million
- Net loss of $5.0 million, which includes non-recurring transaction costs of $1.0 million
- EBITDA of $2.3 million, excluding non-recurring transaction costs
Cano Merger Update
- In late stages of SEC registration process
- Joint listing on AIM and Amex
- Received commitment for underwritten bank facility
- Received preferred shareholder approval; common shareholder approval required
- Expected close in early second calendar quarter 2010
- Proved reserves of Cano are approximately three times the size of Resaca's in terms of barrels of oil equivalents
Jay Lendrum, Chief Executive Officer of Resaca, commented, "At the end of our last fiscal year, we achieved our target water injection rate of 18,000 barrels of water per day at Cooper Jal and we have maintained that injection level since that time. The increased water injection, along with facility upgrades and injection well cleanouts, has resulted in significant reservoir response and production increases at Cooper Jal. In addition, we have had continued success with our refrac program at Cooper Jal. We continue to make progress in completing our merger with Cano and look forward to completing the merger and integration of Cano's operations over the coming months. We believe these activities validate our strategy to deliver shareholder value through the acquisition and exploitation of known oil and gas reserves using proven engineering techniques."
CHIEF EXECUTIVE'S STATEMENT
I am pleased to present the interim results for Resaca Exploitation for the six months that ended December 31, 2009.
Financial and Operational Results
Our results for this period were negatively impacted by approximately $1 million of transaction costs, which must be expensed as incurred under U.S. GAAP. Production over the six month period was negatively impacted by production that was shut-in during our prior fiscal year and field downtime due to weather and other factors outside of our control. During the six months ended December 31, 2009, we restored to production all of our previously shut-in wells that are economic at current prices. In addition, we sustained the water injection level of 18,000 barrels of water per day at Cooper Jal we achieved in June 2009, made facility upgrades, performed injection well cleanouts, and continued the implementation of our re frac program. These efforts have increased production over the average daily production for the six months ended December 31, 2009. We plan to continue the implementation of this program through the end of the current fiscal year and into the 2011 fiscal year.
Cano Merger Update
During this period, we announced an important merger with Cano Petroleum. We believe we have found an excellent partner in Cano, which has a significant asset base that is complementary to our assets. The addition of Cano’s properties and members of Cano's management team will enable us to expand our exploitation business plan. The proved reserves of Cano are approximately three times the size of Resaca's in terms of barrels of oil equivalents. We believe that Resaca management will fully exploit the value of the combined Resaca-Cano reserve base and greatly enhance value for Resaca’s shareholders in the process. Upon completion of the merger, Resaca will have an even stronger foundation for future growth, both organically and through acquisitions. Upon completion of the merger, Resaca will have over 7,000 shareholders and will be dually listed in the U.S. on the NYSE Amex and in the U.K. on AIM, which we believe will enhance the liquidity of Resaca's shares.
The merger is subject to customary closing conditions as well as requirements that Resaca successfully register its shares with the U.S. Securities and Exchange Commission and that Resaca refinance its current debt obligations. Because the merger will technically constitute a reverse takeover under the AIM rules, Resaca will also have to be re-admitted to AIM.
We filed a Form S-4 Registration Statement with the SEC on October 23, 2009 and have filed three subsequent amendments to the Form S-4 for the SEC's review. The required admission document for re-admission to the AIM is currently being prepared and will be completed in conjunction with the finalization of the Form S-4 Registration Statement. Once the Form S-4 and admission document are finalized, the merger must be approved by a majority of Resaca’s common shareholders and by a majority of Cano's common stockholders. In addition, a majority of Cano's preferred shareholders must approve the transaction. Cano received approval of the merger from a majority of its preferred shareholders in October 2009. In addition, as announced on 4 February 2010, we received a commitment for a new bank facility that will close in conjunction with the merger.
For the remainder of the 2010 fiscal year and in fiscal year 2011, we will continue to focus on exploiting our current property base while completing and integrating the Cano merger. We will also seek to grow the company selectively through additional mergers and acquisitions. We believe these efforts will result in enhanced shareholder value.