POIG News Petrol Oil and Gas Reports Second Quarter 2006 Operating Results; Second Quarter Revenue Increases 50% from First Quarter
OVERLAND PARK, Kan.--(BUSINESS WIRE)--Aug. 8, 2006--Petrol Oil and Gas, Inc. (OTCBB: POIG), an independent oil and gas company, today reported its operating results for the second quarter and first half of 2006.
For the quarter ended June 30, 2006, revenue totaled $1,824,907, compared with $1,805,491 in the second quarter of 2005. Petrol's second quarter revenues were approximately 50% higher than revenues recorded in the first quarter of 2006. Petrol reported a net loss of ($2,095,420), or ($0.07) per share, for the three months ended June 30, 2006, versus a net loss of ($630,448), or ($0.03) per share, in the prior-year period. Net loss for the quarter included non-cash depreciation, depletion, and amortization expense of $534,215, an increase of 130% from the prior-year, reflecting depreciation and amortization expenses associated with Petrol's new pipelines and gas processing systems and depletion related to production. Second quarter results were also impacted by higher levels of interest expense, which rose 139% to $1,098,788 as Petrol utilized its credit facility to fund drilling activities. Over 25% ($276,682) of the interest expense was attributable to non-cash charges related to the accretion of the value of warrants issued to Laurus Funds in conjunction with the credit facility. The second quarter loss also included an increase of $489,599 in general and administrative expenses as Petrol expanded its infrastructure to support higher levels of production during the second half of the year. Petrol had an increase of approximately 50% in the number of gas production wells, most of which are currently in the de-watering phase and therefore delivering minimal revenues, along with the addition of pipelines, gas processing and associated assets, that required higher expense levels relating to personnel, consulting fees and systems.
During the six months ended June 30, 2006, Petrol reported revenue of $3,040,932, compared with revenue of $2,996,102 in the corresponding period of the previous year. For the first half of 2006, Petrol recorded a net loss of ($3,930,617), or ($0.14) per share, compared with a net loss of ($2,302,152), or ($0.09) per share, in the six months ended June 30, 2005. Net loss for the 2006 six-month period included non-cash depreciation, depletion, and amortization expense of $998,864, an increase of 71%, from the prior-year period. The six-month results were also impacted by higher levels of interest expense, which rose 115% to $1,789,108 as a result of higher borrowing in support of increased drilling activities in Petrol's new Coal Creek project. In connection with the higher borrowing, approximately 33% ($583,156) of the interest expense was directly associated with the expensing of warrants relating to Petrol's $50 million credit facility. The loss also included increased general and administrative expenses of $751,074 due to Petrol's expansion of infrastructure in the new Coal Creek project to support higher levels of production during the second half of the year.
Petrol ended the second quarter of fiscal 2006 with cash and cash equivalents of approximately $11.4 million in the bank, compared with $8.4 million at the end of 2005.
"The 50% sequential increase in revenue from first quarter levels reflects changes in gas pricing and the initial stages of increasing our production as additional wells come on line," stated Paul Branagan, President and Chief Executive Officer of Petrol. "The increase in second quarter revenue was moderated by delays in connecting new wells in our Coal Creek Project to the Enbridge regional interstate pipeline, along with the extensive de-watering required in order to efficiently liberate gas from the coals in this new project. We do not expect to incur many of the one-time expenses associated with the early stages of financing and development of these new project properties like Coal Creek. We do expect gas production from the Burlington and Waverly areas of the Coal Creek Project, which contributed nominally to our second quarter results, to increase significantly as more production wells are hooked up to the sales pipeline. Furthermore drilling of additional salt water disposal wells and the installation of high-volume water injection pumps on our existing saltwater disposal wells will benefit the current production wells as well as additional wells we are in the process of drilling. Furthermore drilling of additional salt water disposal wells and the installation of high-volume water injection pumps on our existing saltwater disposal wells will benefit the current production wells as well as additional wells we are in the process of drilling. To date, we have drilled 45 production wells and 5 saltwater disposal wells in the Coal Creek Project, and we have filed drilling intents for 10 additional wells that should come on line late in the third quarter. The entire Coal Creek development plan includes the drilling and completion of about 540 production wells, along with the completion of three gas gathering pipelines and gas processing systems over a two to three year period."
"At our more mature Petrol-Neodesha Project, which is south of Coal Creek, we have been drilling two to three wells per month. Six new wells were drilled and completed during the first half of 2006, and we are in the process of completing five more wells at the present time. Fourteen additional wells are planned for the third and fourth quarters, bringing to 25 the number of new wells drilled this year. We continue to enjoy a 100% success rate when drilling Petrol-Neodesha wells and have identified a number of opportunities to re-complete certain existing wells in order to tap into other gas-bearing zones that were bypassed when previous owners initially drilled the wells. We are also implementing advanced stimulation techniques at the project in order to improve our overall understanding of the effectiveness of multi-zone stimulations and their ability to enhance production and reduce operating costs," concluded Mr. Branagan.
Petrol will host a conference call at 4:30 p.m. EDT today to discuss the financial results and outlook for the balance of 2006. Interested parties may participate in the conference call by dialing 877-803-5726 (international/local participants dial 706-679-6112) and referencing Conference ID 4048723. A replay of the conference call will be available for 30 days, commencing two hours after the completion of the conference call, by dialing 800-642-1687 (international/local participants dial 706-645-9291) and entering the conference ID 4048723.
Petrol is an independent oil and gas company currently involved in the development of oil and natural gas from leases encompassing approximately 165,000 gross acres in Kansas and Missouri. Its common stock is quoted on the OTC Bulletin Board under the symbol "POIG." Additional information on Petrol is available on its website at http://www.petroloilandgas.com.
This press release includes statements that may constitute "forward-looking" statements, usually containing the words "believe," "estimate," "project," "intend," "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. Factors that would cause or contribute to such differences include, but are not limited to, the actual amount of gas production at the Petrol-Neodesha Project, the continued production of gas at historical rates, de-watering and other delays at the Coal Creek Project, the availability of sufficient funding to complete the Coal Creek Project, costs of operations, oil and gas prices, risks and effects of legal and administrative proceedings and/or governmental regulation, the ability to manage growth, and other risks detailed in Petrol's periodic report filings with the Securities and Exchange Commission. By making these forward-looking statements, Petrol undertakes no obligation to update these statements for revisions or changes after the date of this release.
Petrol Oil and Gas
Condensed Consolidated Balance Sheets
June 30, December 31,
2006 2005
----------------- ------------------
Assets Unaudited Audited
Current assets:
Cash $ 11,377,329 $ 8,435,203
Accounts receivable 962,649 613,814
Prepaid expenses 35,028 -
----------------- ------------------
Total current assets 12,375,006 9,049,017
----------------- ------------------
Fixed assets, net 4,285,889 2,444,903
----------------- ------------------
Other assets:
Oil and gas properties using
full cost accounting:
Properties not subject to
amortization 1,189,237 954,002
Properties subject to
amortization 20,806,102 13,662,783
Capitalized loan costs, net 1,021,720 816,329
Deposits 1,932 -
Derivative asset 904,478 -
----------------- ------------------
Total other assets 23,923,469 15,433,114
$ 40,584,364 $ 26,927,034
================= ==================
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable 374,765 1,374,938
Accrued liabilities 536,112 151,168
Short-term derivative liability - 1,183,685
Current portion of long term
debt 9,512,412 2,101,111
----------------- ------------------
Total current liabilities 10,423,289 4,810,902
----------------- ------------------
Asset retirement obligation 840,297 749,618
Long-term derivative liability - 512,931
Long-term debt, less current
portion 18,502,639 12,375,007
----------------- ------------------
19,342,936 13,637,556
----------------- ------------------
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $0.001 par
value, 10,000,000
shares authorized, no shares
issued and outstanding
Common stock, $0.001 par value,
100,000,000 shares authorized
29,004,325 and 26,890,083 shares
issued and outstanding at June 30,
2006 and December 31, 2005,
respectively 29,005 26,889
Stock bought or for services not issued,
zero and 740,000 at June 30, 2006
and December 31, 2005, respectively - 740
Unamortized cost of stock, warrants &
options issued for services (1,721,973) (2,380,365)
Subscription receivable - (75,000)
Additional paid-in capital 28,400,633 25,534,114
Other comprehensive income
(loss) 904,478 (1,696,616)
Accumulated (deficit) (16,794,003) (12,931,186)
----------------- ------------------
10,818,140 8,478,576
----------------- ------------------
$ 40,584,364 $ 26,927,034
================= ==================
Petrol Oil and Gas
Condensed Consolidated Statements of Operations
For the Six For the Three
months ended months ended
June 30, June 30,
--------- -------- ------- ---------
2006 2005 2006 2005
--------- -------- ------- ---------
Revenue
Oil and gas
activities $ 2,980,932 $ 2,996,102 $ 1,794,907 $ 1,805,491
Operator fees 60,000 - 30,000 -
------------ ------------ ------------ ------------
Total revenue 3,040,932 2,996,102 1,824,907 1,805,491
Expenses:
Direct costs 1,155,354 1,711,852 569,498 1,293,851
Pipeline costs 383,922 - 229,912 -
General and
administrative 1,371,415 620,341 806,822 320,223
Professional and
consulting fees 1,272,886 1,554,434 681,092 141,854
Depreciation,
depletion and
amortization 998,864 582,104 534,215 232,650
------------ ------------ ------------ ------------
Total expenses 5,182,441 4,468,731 2,821,539 1,988,578
------------ ------------ ------------ ------------
Net operating
(loss) (2,141,509) (1,472,629) (996,632) (183,087)
------------ ------------ ------------ ------------
Other income (expense):
Interest and
other income 139,350 23,910 137,556 10,257
Interest expense (1,928,458) (853,433) (1,236,344) (457,618)
------------ ------------ ------------ ------------
Total other
income
(expense) (1,789,108) (829,523) (1,098,788) (447,361)
------------ ------------ ------------ ------------
Net (loss) $(3,930,617) $(2,302,152) $(2,095,420) $ (630,448)
============ ============ ============ ============
Weighted average
number of common
shares outstanding
- basic and fully
diluted 28,955,872 24,962,730 28,497,033 25,096,052
============ ============ ============ ============
Net (loss) per
share - basic and
fully diluted $ (0.14) $ (0.09) $ (0.07) $ (0.03)
============ ============ ============ ============
