Published:

South Texas Oil Company Announces Second Quarter 2008 Financial Results

SAN ANTONIO, Aug. 19 /PRNewswire-FirstCall/ -- South Texas Oil Company (Nasdaq: STXX) today announced second quarter 2008 financial results.

    Highlights:
    -- Record Oil & Gas Sales: $3.8 Million

Second Quarter 2008 Results

The Company reported record oil and gas sales for the quarter-ended June 30, 2008 of $3.8 million, versus $796,000 in the same period in 2007, an increase of 383%. Total revenues were $3.8 million for the second quarter 2008, versus $1.3 million in the year-ago period. Drilling services, a revenue line item in previous periods, did not contribute to total revenue in the 2008 quarterly period, but did contribute $522,000 in the second quarter 2007.

The Company reported a net loss for the second quarter 2008 of $6.8 million, or $0.42 per share, compared with a net loss of $800,000, or $0.07 per share, for the same period in 2007. Included in the second quarter 2008 costs and expenses was a loss from derivatives of $4.3 million, compared to no loss for the same period in 2007. The agreements which generated the losses during the second quarter 2008 were completely offset by additional contracts purchased at the end of the quarter. Because of the contracts' covered status, the Company does not anticipate that future additional losses will be realized from the contracts that were outstanding during the second quarter 2008. The Company did not engage in derivative transactions during the second quarter 2007.

All per-share amounts are presented on a weighted average basis. At June 30, 2008, 16,017,736 weighted average shares were outstanding.

First Half 2008 Results

The Company reported oil and gas sales for the six months-ended June 30, 2008 of $5.7 million, versus $892,000 in the same period in 2007, an increase of 542%. Total revenues were $5.7 million for the first half of 2008, versus $1.4 million in the year-ago period. Drilling services, a revenue line item in previous periods, did not contribute to total revenue in the 2008 year-to-date period, but did contribute $522,000 in the same period in 2007.

The Company reported a net loss for the first half of 2008 of $10.2 million, or $0.63 per share, compared with a net loss of $1.3 million, or $0.10 per share, for the same period in 2007. Included in the first half 2008's costs and expenses was a loss from derivatives of $5.4 million, compared to no loss for the same period in 2007. The Company did not engage in derivative transactions during the comparable period in 2007.

For the first half of 2008, net cash used in operations was $176,000, as compared to net cash used in operations for the same period in 2007 of $767,000.

At June 30, 2008, the Company's total assets were $64.7 million and stockholders' equity was $20.5 million. The Company's cash position at June 30, 2008 was $4.9 million, and its long-term debt was $34.1 million.

Management Comment

Mike Pawelek, President and CEO, said: "The new management team joined the Company at the end of this reporting period, on June 23, 2008. One of our main objectives is to strengthen our financial and operating performance going forward as our management styles and industry experiences become imbued at South Texas. The Company's asset portfolio is strong and lends itself to development drilling and measured-risk exploration. To help the income statement, we eliminated a glaring line item by largely unwinding the hedge position that contributed to the net loss we posted during the second quarter. On the operations front, in a subsequent event, we spudded the State Tract 127 #1 well in state waters in Matagorda Bay,Texas. The well, which we operate with an approximate 20% working interest, targets theFrio formation at a proposed measured depth of 12,000 feet. We expect to reach total depth on the well in mid-September. The Company anticipates furnishing a more comprehensive operations update later in the third quarter.

"We acknowledge that drilling and completion results are the one of the key marks of our effectiveness as management. We welcome the challenge. I look forward to providing our shareholders with additional updates now that we are firmly at the helm of South Texas Oil and working diligently to grow reserves and production."

About South Texas Oil Company

San Antonio-based South Texas Oil Company is an independent oil and natural gas exploration and production company with operations inSouth Texas, the Gulf Coast and inColorado. The Company has approximately 27,000 net acres and a high-working-interest inventory of drillable locations within its operating areas.

Forward-looking Statements

Certain statements made in this press release contain forward-looking statements that involve a number of risks and uncertainties. This forward-looking information is based on certain assumptions, including, among others, presently known physical data concerning size and character of reservoirs and economic recoverability. Some of these expectations may be based upon assumptions or judgments that prove to be incorrect. In addition, operations involve numerous risks and uncertainties, many of which are beyond South Texas Oil's control, which could result in expectations not being realized or otherwise materially affect the financial condition, results of operation and cash flows. Additional information regarding these and other risks are contained in South Texas Oil's filings with the Securities and Exchange Commission.

SOURCE South Texas Oil Company

Tags: ,OIL,ERN,TX-STXX-Q2-08-Results

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