Warren Resources Inc. is a growing independent energy company engaged in the exploration and development of domestic natural gas and oil reserves. Warren is primarily focused on the exploration and development of coalbed methane properties located in the Rocky Mountain region and its water flood oil recovery program in the Wilmington Unit located in the Los Angeles Basin of California. The Company is headquartered in New York New York and its exploration and development subsidiary Warren E&P Inc. is headquartered in Casper Wyoming. Warren Resources Inc. has a market cap of $121.8 million; its shares were traded at around $2.07 with a P/E ratio of 3.5 and P/S ratio of 1.1.
Highlight of Business Operations:Our cash and cash equivalents decreased $10.3 million during the first quarter of 2009 to $19.4 million at March 31, 2009. This resulted from cash used in investing activities of $17.8 million. This was partially offset by cash provided by operating activities of $0.2 million and cash provided by financing activities of $7.3 million.
The Company recorded an impairment expense of $272.3 million at December 31, 2008 relating to its ceiling test on the carrying costs of its oil and gas properties and goodwill impairments. This resulted primarily from realized oil prices decreasing 62% from $86.21 at December 31, 2007 to $32.92 at December 31, 2008. As a result, many of our proved undeveloped reserves became uneconomic at this oil price. Additionally, the Company wrote off approximately $3.4 million of goodwill at December 31, 2008. The Company had no impairment charges during the three months ended March 31, 2009.
On November 19, 2007, Warren entered into a five year, $250 million credit agreement with Merrill Lynch Capital on behalf of itself and a syndicate of five participating banks (the Credit Facility). The Credit Facility provides for a revolving loan up to the lesser of (i) the borrowing base (ii) $250 million or (iii) the draw limit requested by the Company. The Credit Facility matures on November 19, 2012. It is secured by substantially all of our assets. The borrowing base will be determined by the lenders at least semi-annually on April 1 and October 1 of each year, and is based in part on the proved reserves of the Company. Interest payments are made quarterly in arrears. The current borrowing base is $120 million and the overadvance option is $15 million, representing an immediate availability of $135 million. The overadvance option under the Credit Facility expires on May 19, 2009. The Company is subject to certain covenants required by the Credit Facility which include, but are not limited to the maintenance of the following financial ratios (1) a minimum current ratio (including the unused borrowing base and overadvance option in current assets) of not less than 1.0 to 1.0 and (2) a minimum annualized consolidated EBITDAX (as defined by the Credit Facility) to net interest expense of not less than to of 2.5 to 1.0. As of March 31, 2009, the Company had borrowed $119.8 million under the Credit Facility and was in compliance with all covenants. If oil and gas commodity prices remain at low levels, the Company could be in violation of Credit Facility covenants during 2009. If the Company fails to satisfy its Credit Facility covenants, it would be an event of default. Under such event of default and upon notice, all borrowings would become immediately due and payable to the lending banks.
During the first quarter of 2009, operating results declined significantly compared to 2008. Primarily, this resulted from the significant decline in oil and gas commodity prices. Additionally during the first quarter of 2009, the Company incurred a net loss of $6.6 million as compared to net income of $9.4 million for the comparable period of 2008. At March 31, 2009, current assets were approximately $1.1 million less than current liabilities. As mentioned previously, the unused availability under the Credit Facility is added to current assets when calculating the current ratio covenant.
Oil and gas sales. Revenue from oil and gas sales decreased $11.9 million in the first quarter of 2009 to $11.5 million, a 51% decrease compared to the same quarter in 2008. This decrease resulted from a decrease in realized energy prices. The average realized price per barrel of oil for the three months ended March 31, 2009 and 2008 was $35.14 and $85.17, respectively. Additionally, the average realized price per Mcf of gas for the three months ended March 31, 2009 and 2008 was $2.89 and $6.80, respectively. Net oil production for the three months ended March 31, 2009 and 2008 was 253 Mbbls and 243 Mbbls, respectively. Net gas production for the three months ended March 31, 2009 and 2008 was 920 Mmcf and 405 Mmcf, respectively.
Lease operating expense. Lease operating expense for the first quarter of 2009 increased 50% to $8.8 million ($3.61 per Mcfe) compared to $5.9 million ($3.14 per Mcfe) in the comparable period of 2008. Primarily, this increase resulted from an increase in production. Total production increased to 2.4 Bcfe for the first quarter of 2009 compared to 1.9 Bcfe for the first quarter of 2008, an increase of 31%.
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