APPROACH RESOURCES INC. (AREX, Financial) filed Quarterly Report for the period ended 2009-03-31.
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 $160.6 million; its shares were traded at around $7.75 with a P/E ratio of 6.8 and P/S ratio of 2.1.
Commodity derivative activities. Realized gains from our commodity derivative activity increased our earnings by $3.2 million and by $61,000 for the three months ended March 31, 2009 and 2008, respectively. Our average realized price, including the effect of commodity derivatives, was $5.24 per Mcfe for the three months ended March 31, 2009, compared to $9.64 per Mcfe for the three months ended March 31, 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 gain on commodity derivatives was $2.1 million for the three months ended March 31, 2009 and the unrealized loss on commodity derivatives was $4.9 million for the three months ended March 31, 2008. 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. 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 gain (loss) on commodity derivatives.
Lease operating expense. Our lease operating expenses, or LOE, increased $1.0 million, or 69.6%, for the three months ended March 31, 2009 to $2.4 million ($0.94 per Mcfe) from $1.4 million ($0.71 per Mcfe) for the three months ended March 31, 2008. The increase in LOE over the prior year period was primarily a result of increased activities in our Cinco Terry field. Initial compression was installed in Cinco Terry during the first quarter of 2008 and has increased as a result of additional facilities required to compress and treat the natural gas produced from Cinco Terry. Compression and treating costs also included higher repair and maintenance costs attributable to the compression and treating facilities in both Cinco Terry and Ozona Northeast. In addition, the increase in LOE during the three months ended March 31, 2009 was partially attributable to a rise in estimated ad valorem taxes and actual well-related repair and maintenance costs. We do not expect the level of LOE for the balance of 2009 to differ materially from the first quarter of 2009. Following is a summary of lease operating expenses (per Mcfe):
General and administrative. Our general and administrative, or G&A, expenses increased $864,000, or 44.4%, to $2.8 million ($1.11 per Mcfe) for the three months ended March 31, 2009 from $1.9 million ($0.98 per Mcfe) for the three months ended March 31, 2008. G&A expenses for 2009 included higher share-based compensation resulting from timing of payment of 2009 annual director fees, as well as higher salaries and related employee benefit costs attributable to our increase in staff from the prior year period. Except for $377,000 in non-cash, share-based compensation expense for 2009 annual director fees incurred in the first quarter of 2009, we do not expect the level of G&A expenses for the balance of 2009 to differ materially from the first quarter of 2009. Following is a summary of G&A expenses (in millions and per Mcfe):
Depletion, depreciation and amortization. Our depletion, depreciation and amortization, or DD&A, expenses increased $1.7 million, or 33.2%, to $6.9 million for the three months ended March 31, 2009 from $5.2 million for the three months ended March 31, 2008. Our DD&A expenses per Mcfe increased by $0.10, or 4%, to $2.74 per Mcfe for the three months ended March 31, 2009, compared to $2.64 per Mcfe for the three months ended March 31, 2008. The increase in DD&A expenses was primarily attributable to increased production and higher capital costs, partially offset by an increase in our estimated proved reserves at December 31, 2008. The higher DD&A expense per Mcfe was primarily attributable to higher capital costs incurred in North Bald Prairie and reserve revisions in Ozona Northeast at December 31, 2008. In North Bald Prairie, we paid capital costs attributable to the 50% working
We borrowed $28.8 million and $13.8 million under our revolving credit facility during the three months ended March 31, 2009 and 2008, respectively. We repaid $24.6 million and $6.5 million of the amounts borrowed under the revolving credit facility during the three months ended March 31, 2009 and 2008, respectively.
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 $160.6 million; its shares were traded at around $7.75 with a P/E ratio of 6.8 and P/S ratio of 2.1.
Highlight of Business Operations:
Oil and gas sales. Oil and gas sales decreased $8.9 million, or 47.1%, for the three months ended March 31, 2009 to $10.1 million from $19.0 million for the three months ended March 31, 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 706 MMcfe compared to the prior period. The average price per Mcfe we received for our production (before the effect of commodity derivatives) decreased from $9.61 to $3.98 per Mcfe as oil and gas prices decreased significantly between the two periods. Of the $8.9 million decrease in revenues, approximately $11.3 million was attributable to a decrease in oil and gas prices, which was partially offset by approximately $2.4 million that was attributable to growth in production volume from the continued development of Cinco Terry.Commodity derivative activities. Realized gains from our commodity derivative activity increased our earnings by $3.2 million and by $61,000 for the three months ended March 31, 2009 and 2008, respectively. Our average realized price, including the effect of commodity derivatives, was $5.24 per Mcfe for the three months ended March 31, 2009, compared to $9.64 per Mcfe for the three months ended March 31, 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 gain on commodity derivatives was $2.1 million for the three months ended March 31, 2009 and the unrealized loss on commodity derivatives was $4.9 million for the three months ended March 31, 2008. 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. 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 gain (loss) on commodity derivatives.
Lease operating expense. Our lease operating expenses, or LOE, increased $1.0 million, or 69.6%, for the three months ended March 31, 2009 to $2.4 million ($0.94 per Mcfe) from $1.4 million ($0.71 per Mcfe) for the three months ended March 31, 2008. The increase in LOE over the prior year period was primarily a result of increased activities in our Cinco Terry field. Initial compression was installed in Cinco Terry during the first quarter of 2008 and has increased as a result of additional facilities required to compress and treat the natural gas produced from Cinco Terry. Compression and treating costs also included higher repair and maintenance costs attributable to the compression and treating facilities in both Cinco Terry and Ozona Northeast. In addition, the increase in LOE during the three months ended March 31, 2009 was partially attributable to a rise in estimated ad valorem taxes and actual well-related repair and maintenance costs. We do not expect the level of LOE for the balance of 2009 to differ materially from the first quarter of 2009. Following is a summary of lease operating expenses (per Mcfe):
General and administrative. Our general and administrative, or G&A, expenses increased $864,000, or 44.4%, to $2.8 million ($1.11 per Mcfe) for the three months ended March 31, 2009 from $1.9 million ($0.98 per Mcfe) for the three months ended March 31, 2008. G&A expenses for 2009 included higher share-based compensation resulting from timing of payment of 2009 annual director fees, as well as higher salaries and related employee benefit costs attributable to our increase in staff from the prior year period. Except for $377,000 in non-cash, share-based compensation expense for 2009 annual director fees incurred in the first quarter of 2009, we do not expect the level of G&A expenses for the balance of 2009 to differ materially from the first quarter of 2009. Following is a summary of G&A expenses (in millions and per Mcfe):
Depletion, depreciation and amortization. Our depletion, depreciation and amortization, or DD&A, expenses increased $1.7 million, or 33.2%, to $6.9 million for the three months ended March 31, 2009 from $5.2 million for the three months ended March 31, 2008. Our DD&A expenses per Mcfe increased by $0.10, or 4%, to $2.74 per Mcfe for the three months ended March 31, 2009, compared to $2.64 per Mcfe for the three months ended March 31, 2008. The increase in DD&A expenses was primarily attributable to increased production and higher capital costs, partially offset by an increase in our estimated proved reserves at December 31, 2008. The higher DD&A expense per Mcfe was primarily attributable to higher capital costs incurred in North Bald Prairie and reserve revisions in Ozona Northeast at December 31, 2008. In North Bald Prairie, we paid capital costs attributable to the 50% working
We borrowed $28.8 million and $13.8 million under our revolving credit facility during the three months ended March 31, 2009 and 2008, respectively. We repaid $24.6 million and $6.5 million of the amounts borrowed under the revolving credit facility during the three months ended March 31, 2009 and 2008, respectively.
Read the The complete ReportAREX is in the portfolios of NWQ Managers of NWQ Investment Management Co.
