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Infinity Announces Second Quarter Operating Results


DENVER, Aug. 19 /PRNewswire-FirstCall/ -- Infinity Energy Resources, Inc. (Pink Sheets: IFNY) (the "Company"), an independent oil and gas exploration and development company, today reported its operating results for the second quarter and six months ended June 30, 2008.

On August 18, 2008, the Company filed its Quarterly Report on Form 10-Q for the three and six months ended June 30, 2008. It is recommended that interested parties consult the Form 10-Q report, along with the Annual Report on Form 10-K for the year ended December 31, 2007, for additional information on the Company and its financial condition. A brief summary of operating results for the respective periods ended June 30, 2008 is provided below.

Financial and Operations Review

For the three months ended June 30, 2008, revenue approximated $1.3 million, compared with $2.5 million in the second quarter of 2007. An operating loss of $0.6 million was posted in the most recent quarter, compared with an operating loss of $17.3 million in the corresponding period of the previous year. The Company reported a net loss of $0.8 million, or $0.05 per share, for the quarter ended June 30, 2008, versus a net loss of $16.1 million, or $0.90 per share, in the quarter ended June 30, 2007. Operating results for the second quarter of 2007 included a credit of $1.2 million related to changes in derivative values.

For the six months ended June 30, 2008, revenue approximated $2.5 million, compared with $4.6 million in the six months ended June 30, 2007. An operating loss of $1.4 million was posted in the first half of 2008, compared with an operating loss of $19.5 million in the corresponding period of the previous year. The Company reported a net loss of $2.1 million, or $0.12 per share, for the six months ended June 30, 2008, versus a net loss of $19.8 million, or $1.11 per share, in the six months ended June 30, 2007. Operating results for the first half of 2008 and 2007 included charges of $34,000 and $351,000, respectively, related to changes in derivative values.

EBITDA (earnings from continuing operations before interest, income taxes, depreciation, depletion, amortization and accretion expenses, and change in derivative fair value) for the three and six months ended June 30, 2008 approximated $41,000 and ($271,000) respectively. (Note: A reconciliation of net loss to EBITDA, a non-GAAP measure, is provided in the financial tables following this commentary).

Exploration and production operations produced 105.9 million cubic feet equivalents (MMcfe) and 228.8 MMcfe during the three and six months ended June 30, 2008, respectively, compared with 346.3 MMcfe and 656.3 MMcfe in the respective prior-year periods. The following table provides information for the three and six months ended June 30, 2008 and 2007, respectively:



                              For the Three              For the Six
                               Months Ended              Months Ended
                                  June 30,                  June 30,
                             2008         2007         2008         2007

    Production:
      Natural gas (MMcf)     105.9        244.3        227.3        473.3
      Crude oil (thousands
       of barrels)               -         17.0          0.3         30.5
      Total (MMcfe)          105.9        346.3        228.8        656.3
    Financial Data
     (thousands of
     dollars):
      Total revenue         $1,286       $2,533       $2,486       $4,632
      Production expenses      622        1,262        1,402        3,320
      Production taxes          41          166           68          301
    Financial Data per
     Unit ($ per Mcfe):
      Total revenue         $12.14       $ 7.31       $10.87       $ 7.05
      Production expenses     5.87         3.64         6.12         5.06
      Production taxes        0.39         0.48         0.30         0.46


Infinity achieved oil and gas revenue of $1.3 million in the three months ended June 30, 2008, compared with $2.5 million in the prior-year period. The $1.2 million, or 49%, decrease in revenue consisted of an approximate $1.7 million decrease attributable to lower oil and gas production, offset by a $0.5 million increase in average prices. The decrease in equivalent production was principally the result of production in 2007 from properties sold to Forest Oil Corporation ("Forest Oil") in January 2008.

Approximately $2.7 million in net cash was used in operating activities during the six months ended June 30, 2008, compared with $1.1 million in net cash used in operating activities in the year-earlier quarter. Net cash provided by investing activities, including proceeds from the sale of certain producing properties in the Rocky Mountain region, totaled $15.3 million in the first half of 2008, versus $15.8 million of cash used in investing activities in the first half of 2007.

Sale of Assets / Farmout

On January 7, 2008, Infinity Oil & Gas ofWyoming, Inc., a wholly owned subsidiary of the Company ("Infinity-Wyoming"), completed the sale of essentially all of its producing oil and gas properties inColorado and Wyoming, along with 80% of its working interest in undeveloped leaseholds in Routt County, Colorado andSweetwater County, Wyoming to Forest Oil. In addition, on December 27, 2007, Infinity Oil and Gas ofTexas, Inc., a wholly owned subsidiary of the Company ("Infinity-Texas"), entered into a Farmout and Acquisition Agreement with Forest Oil (the "Farmout Agreement") for certain oil and gas leaseholds inErath County, Texas. Under the agreement, Forest Oil will operate and earn a 75% interest in the spacing unit for each well in a 10-well drilling program. If Forest Oil completes the drilling program, it will earn a 50% interest in the approximate 25,000 remaining undeveloped net acres and existingErath County infrastructure owned by Infinity-Texas

Amendment to the Second Forbearance Agreement

On March 26, 2008, the Company entered into the Second Forbearance Agreement under its Revolving Credit Facility with Amegy Bank ("Amegy") as a result of the Company's failure to meet substantially all financial and certain other covenants during certain periods of 2007. Under this agreement, Amegy agreed to forbear from exercising any remedies under the Revolving Credit Facility, the revolving note and the related loan documents and to temporarily waive the covered events of default through May 30, 2008. The Company was required to repay the borrowing base deficiency by May 30, 2008, through the sale of assets, refinancing of the loan or some other means of raising capital. The Company failed to comply with the terms of the Second Forbearance Agreement and is currently in discussions with Amegy regarding an extension of the forbearance period or a new forbearance agreement; however, the Company may be unable to reach agreement on these matters at all or on acceptable terms. Amegy is currently entitled to impose a default interest rate (prime plus 6.5%) or to declare an event of default, at which point the entire unpaid balance of the loan, together with all accrued and unpaid interest and other amounts then owing to Amegy would become immediately due and payable. Amegy or other creditors may take action to enforce their rights with respect to outstanding obligations, and Infinity may be forced to liquidate. Because substantially all of the Company's assets are collateral under the Revolving Credit Facility, if Amegy declares an event of default, it would be entitled to foreclose on and take possession of the Company's assets.

These matters, as wells as other risk factors related to the Company's liquidity and financial position, as further discussed in the Company's Form 10-K and Form 10-Q filings, raise substantial doubt as to the Company's ability to continue as a going concern.

Management Comments

"The second quarter of 2008 was noteworthy in several respects as Infinity made significant progress on itsNicaragua concessions and Forest Oil commenced drilling two new wells on our Barnett Shale property inErath County, Texas," noted Stanton E. Ross, Chief Executive Officer of Infinity Energy Resources, Inc.

"In addition, we were able to work with our vendors to settle a significant portion of our accounts payable and reduce our working capital deficit. These developments, along with the farmout with Forest Oil, should allow Infinity time to enhance the value of its remaining assets."

"Although our revenue declined significantly following the sale of our producing oil and gas properties inColorado andWyoming to Forest Oil in January 2008, the Company's second quarter operating loss was reduced substantially when compared with the prior-year period. Higher oil and gas prices widened our revenue/expense spread per Mcfe from $3.19 in the second quarter of 2007 to $5.88 per Mcfe in the most recent quarter."

"The sale of our producing properties inColorado andWyoming to Forest Oil allowed Infinity to significantly reduce its outstanding debt. We retained 100% ownership of our exploratory properties in the Piceance Basin and LaBarge areas in the Rocky Mountains, along with a 20% working interest in any future wells that Forest Oil may drill in the Sand Wash Basin. Meanwhile, we are working closely with Amegy to financially reposition the Company in accordance with its business strategy and focus upon oil and gas development activities inTexas and offshoreNicaragua."

"I am pleased to report that Forest Oil has commenced drilling two in a series of up to ten new wells inErath County, Texas, in accordance with its farmout relationship with Infinity," stated Dr. Renato Bertani, Chief Operating Officer of the Company. "Assuming drill results are favorable, we would expect to realize the benefits of initial production from these activities, which are being funded by Forest Oil, beginning in the third or fourth quarters of 2008. Meanwhile, our Infinity-Texas subsidiary anticipates that its 2008 capital expenditures will be limited to less than $0.5 million to potentially complete two vertical wells that were drilled last year. Our Infinity-Wyoming subsidiary expects to spend less than $0.5 million to plug and abandon and perform reclamation activities on several wells, and potentially to conduct additional geological and geophysical analysis."

"We continue to work towards finalizing the contracts related to our 1.4 million-acre offshore oil and gas concessions inNicaragua," observed Ross. "Last week, as previously reported, the regional government council of the Autonomous Region of the Northern Atlantic ("RAAN") voted to ratify the Company's offshore Nicaraguan exploration and development contracts on August 13, 2008. This followed the ratification of the contracts by the regional government council of the Autonomous Region of the Southern Atlantic ("RAAS") on July 4, 2008. The contracts must now go to the national government in Managua for final review and signature byNicaragua's President, which we hope will be forthcoming in a timely manner. We are prepared to move forward immediately with training of personnel, environmental studies, seismic and other exploratory activities once final approval is granted by the Nicaraguan government. We have already been in contact with several international oil and gas companies regarding their potential interest in working with Infinity to pursue an exploration and development program on the Perlas and Tyra concession blocks, which total 1.4 million acres in waters offshoreNicaragua that range in depth from 100 feet to 300 feet. We continue to believe the offshoreNicaragua concessions have 'world-class' potential and could be the Company's most valuable asset."

Conference Call and Webcast

The Company intends to schedule an investor conference call upon the signing of an extension of the existing forbearance agreement with Amegy or entry into a new forbearance agreement. Management is optimistic that such agreement(s) will be entered into in the near future.

About Infinity Energy Resources, Inc.

Infinity Energy Resources, Inc. is an independent energy company engaged in the exploration, development and production of natural gas and oil inTexas and the Rocky Mountain region ofthe United States. The Company also has oil and gas concessions covering 1.4 million acres offshoreNicaragua in the Caribbean Sea.

The Company is headquartered inDenver, Colorado and its common stock is listed on the Pink Sheets under the symbol "IFNY.PK". For more information on Infinity Energy Resources, Inc., please visit http://www.b2i.us/irpass.asp?BzID=1253&to=ea&s=0 .

Forward-Looking Statement

This press release includes statements that may constitute "forward-looking" statements, usually containing the words "believe", "estimate", "project", "expect" or similar expressions. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Forward-looking statements in this press release include the Company's ability to negotiate successfully with Amegy with respect to ongoing liquidity issues and with respect to an extension of the forbearance period or a new forbearance agreement, the ability of the Company to continue as a going concern, anticipated capital expenditures in 2008, the success of the farmout with Forest Oil and the realization of benefits from potential new wells in the third and fourth quarters of 2008, the success of the Company's efforts to seek ratification of its Nicaraguan contracts, plans to move forward with exploration inNicaragua, and the Company's ability to find an acceptable partner with which to pursue its exploration and development program inNicaragua. Factors that could cause or contribute to such differences include, but are not limited to, operating risks, delays and problems, the availability of drilling rigs and services on acceptable terms, the results of drilling and completions, changes in the prices of oil and gas, unexpected negative geological variances, governmental uncertainties inNicaragua, increases in interest rates, actions by Amegy and/or other creditors with respect to debt obligations, liquidity and capital requirements, the unavailability of capital on acceptable terms or at all, and other risks described under "Risk Factors" in the Company's Annual Report on Form 10-K and in the Company's periodic report filings with the Securities and Exchange Commission.

                 For additional information, please contact:

               Stanton E. Ross, President/CEO at (720) 932-7800

                        (Financial Highlights Follow)



               INFINITY ENERGY RESOURCES, INC. AND SUBSIDIARIES
                         Consolidated Balance Sheets
                                 (Unaudited)


                         ASSETS                       June 30,    December 31,
                                                        2008          2007
                                                      (in thousands, except
                                                     share and per share data)
    Current assets
      Cash and cash equivalents                        $ 1,238      $   741
      Accounts receivable                                  741        1,164
      Prepaid expenses and other                           237          104
      Prepaid severance taxes                                -          675
        Total current assets                             2,216        2,684

    Oil and gas properties, using full cost
     accounting, net of accumulated
     depreciation, depletion, amortization
     and ceiling write-down
      Proved                                             7,290       21,429
      Unproved                                          11,556       17,097
    Other assets, net                                      232        1,090

        Total assets                                   $21,294      $42,300

                     LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities
      Current portion of debt                          $ 9,910      $22,000
      Accounts payable                                   1,405        5,472
      Accrued liabilities                                2,818        4,973
      Current portion of asset retirement obligations      432          423
        Total current liabilities                       14,565       32,868

    Long-term liabilities
      Production taxes payable and other liabilities        99          426
      Asset retirement obligations, less current portion   518        1,087
      Derivative liabilities                               119          194

        Total liabilities                               15,301       34,575

    Commitments and contingencies (Note 9)

    Stockholders' equity
      Preferred stock, par value $.0001, authorized
       10,000,000 shares, issued and outstanding 0
       (6/30/08) and 0 (12/31/07) shares                     -            -
      Common stock, par value $.0001, authorized
       75,000,000 shares, issued and outstanding
       17,869,375 (6/30/08) and 17,871,157
       (12/31/07) shares                                     2            2
      Additional paid-in capital                        79,716       79,371
      Accumulated deficit                              (73,725)     (71,648)
        Total stockholders' equity                       5,993        7,725

          Total liabilities and stockholders' equity   $21,294      $42,300



               INFINITY ENERGY RESOURCES, INC. AND SUBSIDIARIES
                    Consolidated Statements of Operations
                                 (Unaudited)

                              For the Three Months      For the Six Months
                                 Ended June 30,            Ended June 30,
                                2008        2007         2008         2007
                                  (in thousands, except per share data)
    Revenue
      Oil and gas sales       $ 1,286    $  2,533      $ 2,486       $4,632

    Operating expenses
      Oil and gas production
       expenses                   622       1,262        1,402        3,320
      Oil and gas production
       taxes                       41         166           68          301
      General and administrative
       expenses                   812         753        1,609        1,717
      Depreciation, depletion,
       amortization and
       accretion                  385       1,871          777        3,004
      Ceiling write-down of
       oil and gas properties       -      15,750            -       15,750
        Total operating
         expenses               1,860      19,802        3,856       24,092

          Operating loss         (574)    (17,269)      (1,370)     (19,460)

    Other income (expense)
      Interest expense,
       net of capitalization     (320)          -         (776)           -
      Change in derivative
       fair value                   1       1,223          (34)        (351)
      Other                        68         (13)         103          (28)
        Total other income
         (expense)               (251)      1,210         (707)        (379)

          Net loss            $  (825)   $(16,059)     $(2,077)    $(19,839)


    Basic and diluted net
     loss per share
      Net loss                $ (0.05)   $  (0.90)      $(0.12)      $(1.11)

    Weighted average
     shares outstanding-
     basic and diluted         17,869      17,871       17,869       17,871



               INFINITY ENERGY RESOURCES, INC. AND SUBSIDIARIES
                    Consolidated Statements of Cash Flows
                                 (Unaudited)

                                                        For the Six Months
                                                           Ended June 30,
                                                          2008       2007
                                                          (in thousands)
    Cash flows from operating activities
      Net loss                                         $ (2,077)  $ (19,839)
      Adjustments to reconcile net loss to net cash
       used in operating activities
        Depreciation, depletion, amortization and
         accretion                                          777       3,004
        Ceiling write-down of oil and gas properties          -      15,750
        Non-cash stock-based compensation expense           345         585
        Change in fair value of derivative instruments      (75)     (1,069)
        Unrealized loss on commodity derivative
         instruments                                          -       1,565
        Gain on sale of assets                              (17)          -
        Change in operating assets and liabilities
          (Increase) decrease in accounts receivable        423          87
          (Increase) decrease in prepaid expenses and
           other                                            518        (107)
          Increase (decrease) in accounts payable and
           accrued liabilities                           (2,569)     (1,029)
            Net cash used in operating activities        (2,675)     (1,053)

    Cash flows from investing activities
      Capital expenditures - exploration and
       production                                        (3,267)    (15,808)
      Decrease in other assets                              852           -
      Proceeds from sale of fixed assets                 17,677           -
          Net cash provided by (used in) investing
           activities                                    15,262     (15,808)

    Cash flows from financing activities
      (Repayment of) proceeds from borrowings on
       debt                                             (12,090)     17,000
      Debt issuance costs                                     -        (865)
      Repayment of notes payable                              -         (25)
          Net cash (used in) provided by financing
           activities                                   (12,090)     16,110

      Net increase (decrease) in cash and cash
       equivalents                                          497        (751)

    Cash and cash equivalents
      Beginning                                             741         872
      Ending                                           $  1,238   $     121



               INFINITY ENERGY RESOURCES, INC. AND SUBSIDIARIES
Non-GAAP Disclosures: Reconciliation of Net Loss From Continuing Operations to
                                  EBITDA(1)
                                 (Unaudited)

                          For the Three Months Ended  For the Six Months Ended
                                     June 30,                  June 30,
                                  2008       2007         2008         2007
                                   (in thousands)           (in thousands)

    Net loss from
     continuing operations      $ (825)   $ (16,059)   $ (2,077)  $(19,839)
    Adjustments
      Depreciation,
       depletion, accretion
       and amortization            385        1,871         777      3,004
      Ceiling write-down of
       oil and gas properties        -       15,750           -     15,750
      Non-cash stock-based
       compensation expense        162          262         345        585
      Change in derivative
       fair value                   (1)      (1,178)        (75)    (1,069)
      Unrealized loss on
       commodity derivative
       instruments                   -           33           -      1,565
      Interest expense             320            -         776          -
      Non-cash expense related
       to the early
       extinguishment of debt        -            -           -          -
      (Gain) loss on sale of
       assets                        -            -         (17)         -
      Income taxes                   -            -           -          -

    EBITDA                      $   41    $     679    $   (271)  $     (4)

    (1)  In this press release, the term "EBITDA" is used. EBITDA is
         equivalent to earnings from continuing operations before interest,
         income taxes, depreciation, depletion, amortization and accretion
         expenses, stock- based compensation, gains and losses on the sale of
         assets, expense related to the early extinguishment of debt, change
         in derivative fair value and ceiling write-down of oil and gas
         properties. Infinity's management believes EBITDA is an important
         financial measurement tool that provides information about the
         Company's ability to service or incur indebtedness, and pay for its
         capital expenditures. This information differs from measures of
         performance determined in accordance with generally accepted
         accounting principles (GAAP) and should not be considered in
         isolation or as a substitute for measures of performance prepared in
         accordance with GAAP. This measure is not necessarily indicative of
         operating profit or cash flow from operating activities as determined
         under GAAP and may not be equivalent to similarly titled measures of
         other companies.

SOURCE Infinity Energy Resources, Inc.

Tags: ,OIL,MNG,OTC,ERN,CCA,CO-IFNY-Report-Q2ERN
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