Published:
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.
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