China North East Petroleum Sees Increase in '09 Profits
Preliminary, unaudited summary financial results for the Company are set forth below:
Preliminary revenues for 2009 increased 10% to $64.7 million from $58.6 million in 2008 due to increased oil production and revenue generated by the Company's newly acquired contract oil drilling entity, Tiancheng. In 2009, forty two new oil wells were drilled in the Company's oilfields, bringing the total number of producing wells to 289. Total oil production in 2009 was 908,126 barrels, a 41% increase from 645,856 barrels in 2008. Oil prices in 2009 averaged RMB 2,824 per ton (USD$55.97 per barrel), a 41% decrease from 2008 levels of RMB 4,845 per ton (US$94.29 per barrel). Tiancheng contributed $13.6 million of the revenue in 2009, all of which was booked in the fourth quarter, as the acquisition of Tiancheng was completed on September 27, 2009.
Full year 2009 preliminary non-GAAP adjusted EBITDA(1) was $49.6 million, or $2.21 per common share. The Company incurred a preliminary GAAP net loss of $22.1 million, or ($0.99) per diluted share, in 2009. The net loss was primarily due to $49.5 million in non-cash charges related to the impairment of oil and gas properties, change in fair value of warrants and loss on extinguishment of debt. These expenses were $13.8 million, $27.4 million and $8.3 million, respectively.
Mr. Hongjun Wang, President of China North East Petroleum, commented, "While we regret the delay in the filing of our 2009 annual report, our preliminary 2009 non-GAAP financial results which exclude certain non-cash charges were very strong. We were pleased to increase our revenue 10% in 2009 in spite of a significant decrease in oil prices in the first half of the year, compared to oil prices in 2008. Our newly acquired oilfield services division has exceeded our expectations.
"In the wake of our recently announced financial reporting and internal control deficiencies, we are implementing the necessary steps towards improving our internal controls and financial reporting function. We take these issues very seriously and are working aggressively to prevent a reoccurrence of such issues in the future.
"Global oil prices have rebounded from the low levels experienced in late 2008 and early 2009, and we anticipate that oil prices will remain relatively stable or trend higher in the rest of 2010. Consequently, we will continue to drill new wells and expect that cash flow from operations will be sufficient to allow us to meet all of our growth targets this year. We are on plan to drill approximately 60 wells in 2010, excluding acquisitions, and believe we have the ability to drill more than 320 new wells within our existing fields over the next 3-5 years, excluding any potential benefit we could receive from new oilfield leases which we continue to actively pursue. We remain focused on expanding our market position as a leading oilfield production and services company in northeast China with a continued focus on expanding our revenue and maximizing our profits. We are encouraged by our opportunities ahead and look forward to updating you on our latest developments in the weeks to come," concluded Mr. Wang.
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