APPROACH RESOURCES INC. (AREX, Financial) filed Quarterly Report for the period ended 2009-06-30.
Approach Resources Inc. is an independent energy company engaged in the exploration development exploitation production and acquisition of unconventional natural gas and oil properties onshore in the United States and Western Canada. The Company focuses its growth efforts primarily on finding and developing natural gas reserves in known tight gas sands and shale areas. The Company currently operates in Texas New Mexico and Kentucky and has a non-operating interest in Western Canada. APPROACH RESOURCES INC. has a market cap of $154.5 million; its shares were traded at around $7.455 with a P/E ratio of 9.2 and P/S ratio of 2.
Commodity derivative activities. Realized gains and losses from our commodity derivative activity resulted in a gain of $4.4 million and a loss of $542,000 for the three months ended June 30, 2009 and 2008, respectively. Our average realized price, including the effect of commodity derivatives, was $6.30 per Mcfe for the three months ended June 30, 2009, compared to $11.59 per Mcfe for the three months ended June 30, 2008. Realized gains and losses on commodity derivatives are derived from the relative movement of gas prices in relation to the range of prices in our collars or the fixed notional pricing in our fixed price swaps for the applicable periods. The unrealized loss on commodity derivatives was $4.3 million and $9.7 million for the three months ended June 30, 2009 and 2008, respectively. As natural gas commodity prices increase, the fair value of the open portion of those positions decreases. As natural gas commodity prices decrease, the fair value of the open portion of those positions increases. Our unrealized gain on commodity derivatives at June 30, 2009 decreased from March 31, 2009 primarily due to the $4.4 million realized gain from cash settlements. Historically, we have not designated our derivative instruments as cash-flow hedges. We record our open derivative instruments at fair value on our consolidated balance sheets as either unrealized gains or losses on commodity derivatives. We record changes in such fair value in earnings on our consolidated statements of operations under the caption entitled unrealized loss on commodity derivatives.
Lease operating. Our lease operating expenses, or LOE, decreased $103,000, or 5.5%, for the three months ended June 30, 2009 to $1.8 million ($0.77 per Mcfe) from $1.9 million ($0.91 per Mcfe) for the three months ended June 30, 2008. The decrease in LOE over the prior year period was due in part to lower expenses related to well repair and maintenance costs as well as a $235,000 ($0.10 per Mcfe) reduction of our estimated ad valorem tax accrual for the three months ended March 31, 2009, which we recognized during the three months ended June 30, 2009. Except for the $235,000 reduction of our estimated ad valorem tax accrual recognized during the three months ended June 30, 2009, we do not expect the level of LOE for the balance of 2009 to differ materially from the three months ended June 30, 2009. The following is a summary of LOE (per Mcfe):
Depletion, depreciation and amortization. Our depletion, depreciation and amortization, or DD&A, expenses increased $198,000, or 3.3%, to $6.2 million for the three months ended June 30, 2009 from $6.0 million for the three months ended June 30, 2008. Our DD&A expenses per Mcfe decreased by $0.20, or 6.8%, to $2.73 per Mcfe for the three months ended June 30, 2009, compared to $2.93 per Mcfe for the three months ended June 30, 2008. The decrease in DD&A expenses per Mcfe was primarily attributable to an increase in our estimated proved reserves partially offset by an increase in production over the prior year quarter.
Oil and gas sales. Oil and gas sales decreased $23.2 million, or 53.7%, for the six months ended June 30, 2009 to $20.0 million from $43.2 million for the six months ended June 30, 2008. The decrease in oil and gas sales principally resulted from sharp decreases in the price we received for our natural gas, oil and NGL production. The decrease in oil and gas sales was partially offset by the continued development of our Cinco Terry field. Cinco Terry production increased by approximately 1,100 MMcfe compared to the prior period. The average price we received for our production (before the effect of commodity derivatives) decreased from $10.75 per Mcfe to $4.15 per Mcfe as oil and gas prices decreased significantly between the two periods. Of the $23.2 million decrease in revenues, approximately $27.4 million was attributable to a decrease in oil and gas prices, which was partially offset by approximately $4.2 million attributable to growth in production volume from the continued development of Cinco Terry.
Commodity derivative activities. Realized gains and losses from our commodity derivative activity resulted in a gain of $7.6 million and a loss of $481,000 for the six months ended June 30, 2009 and 2008, respectively. Our average realized price, including the effect of commodity derivatives, was $5.73 per Mcfe for the six months ended June 30, 2009, compared to $10.63 per Mcfe for the six months ended June 30, 2008. Realized gains and losses on commodity derivatives are derived from the relative movement of gas prices in relation to the range of prices in our collars or the fixed notional pricing in our fixed price swaps for the applicable periods. The unrealized loss on commodity derivatives was $2.2 million and $14.6 million for the six months ended June 30, 2009 and 2008, respectively. As natural gas commodity prices increase, the fair value of the open portion of those positions decreases. As natural gas commodity prices decrease, the fair value of the open portion of those positions increases. Additionally, our unrealized gain on commodity derivatives at June 30, 2009 decreased from December 31, 2008 due to the realized gain from cash settlements. Historically, we have not designated our derivative instruments as cash-flow hedges. We record our open derivative instruments at fair value on our consolidated balance sheets as either unrealized gains or losses on commodity derivatives. We record changes in such fair value in earnings on our consolidated statements of operations under the caption entitled unrealized (loss) on commodity derivatives.
Read the The complete ReportAREX is in the portfolios of NWQ Managers of NWQ Investment Management Co.
Approach Resources Inc. is an independent energy company engaged in the exploration development exploitation production and acquisition of unconventional natural gas and oil properties onshore in the United States and Western Canada. The Company focuses its growth efforts primarily on finding and developing natural gas reserves in known tight gas sands and shale areas. The Company currently operates in Texas New Mexico and Kentucky and has a non-operating interest in Western Canada. APPROACH RESOURCES INC. has a market cap of $154.5 million; its shares were traded at around $7.455 with a P/E ratio of 9.2 and P/S ratio of 2.
Highlight of Business Operations:
Oil and gas sales. Oil and gas sales decreased $14.2 million, or 58.9%, for the three months ended June 30, 2009 to $9.9 million from $24.1 million for the three months ended June 30, 2008. The decrease in oil and gas sales principally resulted from sharp decreases in the price we received for our natural gas, oil and NGL production. The decrease in oil and gas sales was partially offset by the continued development of our Cinco Terry field. Cinco Terry production increased by approximately 400 MMcfe compared to the prior period. The average price we received for our production (before the effect of commodity derivatives) decreased from $11.86 per Mcfe to $4.35 per Mcfe as oil and gas prices decreased significantly between the two periods. Of the $14.2 million decrease in revenues, approximately $16.0 million was attributable to a decrease in oil and gas prices, which was partially offset by approximately $1.8 million attributable to growth in production volume from the continued development of Cinco Terry.Commodity derivative activities. Realized gains and losses from our commodity derivative activity resulted in a gain of $4.4 million and a loss of $542,000 for the three months ended June 30, 2009 and 2008, respectively. Our average realized price, including the effect of commodity derivatives, was $6.30 per Mcfe for the three months ended June 30, 2009, compared to $11.59 per Mcfe for the three months ended June 30, 2008. Realized gains and losses on commodity derivatives are derived from the relative movement of gas prices in relation to the range of prices in our collars or the fixed notional pricing in our fixed price swaps for the applicable periods. The unrealized loss on commodity derivatives was $4.3 million and $9.7 million for the three months ended June 30, 2009 and 2008, respectively. As natural gas commodity prices increase, the fair value of the open portion of those positions decreases. As natural gas commodity prices decrease, the fair value of the open portion of those positions increases. Our unrealized gain on commodity derivatives at June 30, 2009 decreased from March 31, 2009 primarily due to the $4.4 million realized gain from cash settlements. Historically, we have not designated our derivative instruments as cash-flow hedges. We record our open derivative instruments at fair value on our consolidated balance sheets as either unrealized gains or losses on commodity derivatives. We record changes in such fair value in earnings on our consolidated statements of operations under the caption entitled unrealized loss on commodity derivatives.
Lease operating. Our lease operating expenses, or LOE, decreased $103,000, or 5.5%, for the three months ended June 30, 2009 to $1.8 million ($0.77 per Mcfe) from $1.9 million ($0.91 per Mcfe) for the three months ended June 30, 2008. The decrease in LOE over the prior year period was due in part to lower expenses related to well repair and maintenance costs as well as a $235,000 ($0.10 per Mcfe) reduction of our estimated ad valorem tax accrual for the three months ended March 31, 2009, which we recognized during the three months ended June 30, 2009. Except for the $235,000 reduction of our estimated ad valorem tax accrual recognized during the three months ended June 30, 2009, we do not expect the level of LOE for the balance of 2009 to differ materially from the three months ended June 30, 2009. The following is a summary of LOE (per Mcfe):
Depletion, depreciation and amortization. Our depletion, depreciation and amortization, or DD&A, expenses increased $198,000, or 3.3%, to $6.2 million for the three months ended June 30, 2009 from $6.0 million for the three months ended June 30, 2008. Our DD&A expenses per Mcfe decreased by $0.20, or 6.8%, to $2.73 per Mcfe for the three months ended June 30, 2009, compared to $2.93 per Mcfe for the three months ended June 30, 2008. The decrease in DD&A expenses per Mcfe was primarily attributable to an increase in our estimated proved reserves partially offset by an increase in production over the prior year quarter.
Oil and gas sales. Oil and gas sales decreased $23.2 million, or 53.7%, for the six months ended June 30, 2009 to $20.0 million from $43.2 million for the six months ended June 30, 2008. The decrease in oil and gas sales principally resulted from sharp decreases in the price we received for our natural gas, oil and NGL production. The decrease in oil and gas sales was partially offset by the continued development of our Cinco Terry field. Cinco Terry production increased by approximately 1,100 MMcfe compared to the prior period. The average price we received for our production (before the effect of commodity derivatives) decreased from $10.75 per Mcfe to $4.15 per Mcfe as oil and gas prices decreased significantly between the two periods. Of the $23.2 million decrease in revenues, approximately $27.4 million was attributable to a decrease in oil and gas prices, which was partially offset by approximately $4.2 million attributable to growth in production volume from the continued development of Cinco Terry.
Commodity derivative activities. Realized gains and losses from our commodity derivative activity resulted in a gain of $7.6 million and a loss of $481,000 for the six months ended June 30, 2009 and 2008, respectively. Our average realized price, including the effect of commodity derivatives, was $5.73 per Mcfe for the six months ended June 30, 2009, compared to $10.63 per Mcfe for the six months ended June 30, 2008. Realized gains and losses on commodity derivatives are derived from the relative movement of gas prices in relation to the range of prices in our collars or the fixed notional pricing in our fixed price swaps for the applicable periods. The unrealized loss on commodity derivatives was $2.2 million and $14.6 million for the six months ended June 30, 2009 and 2008, respectively. As natural gas commodity prices increase, the fair value of the open portion of those positions decreases. As natural gas commodity prices decrease, the fair value of the open portion of those positions increases. Additionally, our unrealized gain on commodity derivatives at June 30, 2009 decreased from December 31, 2008 due to the realized gain from cash settlements. Historically, we have not designated our derivative instruments as cash-flow hedges. We record our open derivative instruments at fair value on our consolidated balance sheets as either unrealized gains or losses on commodity derivatives. We record changes in such fair value in earnings on our consolidated statements of operations under the caption entitled unrealized (loss) on commodity derivatives.
Read the The complete ReportAREX is in the portfolios of NWQ Managers of NWQ Investment Management Co.
