UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1998
Commission File Number 333-42641
RAM Energy, Inc.
(Exact name of registrant as specified in its charter.)
Delaware 52-1535102
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5100 East Skelly Drive, Suite 650
Tulsa, Oklahoma 74135
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(918) 632-0620
Indicate by check mark whether the registrant(1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical
date:
2,727,000 shares of common stock issued and outstanding
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Balance Sheets - December 31, 1997 and March 31, 1998 (unaudited)
Statements of Operations - Three months ended March 31, 1997 and
1998 (unaudited)
Statements of Cash Flows - Three months ended March 31, 1997 and
1998 (unaudited)
Notes to Financial Statements (unaudited)
Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Other Information
Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
RAM ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, 1997 MARCH 31, 1998
----------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,248,421 $ 11,347,793
Accounts receivable:
Oil and gas sales 4,161,392 4,264,754
Joint interest operations, net of allowance for
doubtful accounts of $438,819 in 1997 and $351,605
in 1998 986,571 1,274,724
Related parties 10,000 40,500
Other 23,841 27,888
Prepaid expenses and deposits 365,649 1,096,744
------------- -------------
Total current assets 6,795,874 18,052,403
Properties and equipment, at cost:
Oil and gas properties and equipment, based
on full cost accounting 72,696,425 101,264,454
Gathering and disposal systems - 39,000,000
Other property and equipment 3,499,840 3,606,256
------------- -------------
76,196,265 143,870,710
Less accumulated amortization and depreciation 15,622,566 18,131,494
------------- -------------
Net properties and equipment 60,573,699 125,739,216
Other assets:
Deferred loan costs, net of accumulated amortization
of $356,889 in 1997 and $440,968 in 1998 1,290,299 1,233,818
Deferred offering costs, net of accumulated
amortization of none in 1997 and $41,715 in 1998 733,602 4,964,005
Other 333,895 999,847
------------- -------------
Total assets $69,727,369 $ 150,989,289
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable:
Trade $ 3,934,822 $ 4,293,095
Oil and gas proceeds due others 3,032,659 4,379,915
Accrued liabilities:
Compensation 179,600 62,992
Interest 379,612 1,335,161
Other 270,000 488,000
Preferred stock redemption 1,473,660 600,000
Long-term debt due within one year (Note 3) 97,723 118,608
------------- -------------
Total current liabilities 9,368,076 11,277,771
Gas balancing liability not expected to be settled
within one year 491,237 401,237
Long-term debt due after one year (Note 3) 62,127,442 123,513,547
Deferred income taxes - 20,052,000
Other noncurrent liabilities 1,123,602 208,058
Commitments and contingencies 600,000 600,000
Stockholders' equity (deficiency):
Preferred stock, $.01 par value; authorized-
5,000,000 shares; none issued - -
Common stock, $.01 par value; authorized-
15,000,000 shares; issued and
outstanding-2,727,000 shares 27,270 27,270
Paid-in capital 16,074 16,074
Accumulated deficit (4,026,332) (5,106,668)
------------ -------------
Stockholders' equity (deficiency) (3,982,988) (5,063,324)
------------ -------------
Total liabilities and stockholders' equity (deficiency) $69,727,369 $ 150,989,289
============ =============
</TABLE>
See accompanying notes.
<PAGE>
RAM ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1997 1998
---------- -----------
<S> <C> <C>
Operating revenues:
Oil and gas sales $7,096,812 $ 6,095,140
Gathering systems - 666,000
Other 17,000 58,877
---------- -----------
Total operating revenues 7,113,812 6,820,017
Operating expenses:
Oil and gas production expenses 1,661,281 1,843,398
Oil and gas purchases - 447,000
Gathering system operations - 37,000
Amortization and depreciation 1,841,111 2,653,972
General and administrative, overhead and
other expenses, net of operator's overhead fees
to unrelated interests 770,352 1,108,509
---------- -----------
Total operating expenses 4,272,744 6,089,879
---------- -----------
Operating income 2,841,068 730,138
Other income (expense):
Interest expense (1,292,369) (2,381,872)
Interest income 21,000 66,398
Other - 1,000
---------- -----------
Income (loss) before income taxes 1,569,699 (1,584,336)
Income taxes - (504,000)
---------- -----------
Net income (loss) $1,569,699 $(1,080,336)
========== ===========
Net income (loss) per share $0.58 $(0.40)
========== ===========
Weighted average shares outstanding 2,727,000 2,727,000
========== ===========
</TABLE>
See accompanying notes.
<PAGE>
RAM ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1997 1998
------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 1,569,699 $ (1,080,336)
Adjustments to reconcile net income
(loss) to net cash provided
by operating activities:
Amortization and depreciation 1,841,111 2,653,972
Deferred income taxes - (504,000)
Cash provided (used) by changes in
operating assets and liabilities:
Prepaid expenses and deposits 37,065 63,905
Accounts receivable 1,477,304 571,938
Accounts payable (798,005) (1,383,971)
Accrued liabilities and other (326,416) 660,999
Gas balancing liability (135,231) (90,000)
------------- ------------
Total adjustments 2,095,828 1,972,843
------------- ------------
Net cash provided by operating activities 3,665,527 892,507
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for acquisition of Carlton
Resources Corporation (net of cash
acquired) (Note 2) - (42,600,000)
Payments for oil and gas properties and
equipment (1,319,983) (3,584,653)
Proceeds from sales of oil and gas
properties and equipment 9,693,576 16,624
Payments for other property and equipment - (167,353)
Proceeds from sales of other assets - 53,020
------------- ------------
Net cash provided (used) by investing
activities 8,373,593 (46,282,362)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Senior Notes Offering,
net of discount - 113,327,900
Payments of deferred offering costs - (4,416,505)
Principal payments on other long-term debt (10,396,417) (62,000,000)
Proceeds from borrowings on other
long-term debt - 10,079,090
Payments for Preferred Stock Redemption - (1,473,660)
Payments for loan origination fees - (27,598)
------------- ------------
Net cash provided (used) by financing
activities (10,396,417) 55,489,227
------------- ------------
Increase in cash and cash equivalents 1,642,703 10,099,372
Cash and cash equivalents at beginning
of period 1,607,365 1,248,421
------------- ------------
Cash and cash equivalents at end of
period $ 3,250,068 $ 11,347,793
============= =============
</TABLE>
See accompanying notes.
<PAGE>
RAM ENERGY, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ORGANIZATION AND BASIS OF
FINANCIAL STATEMENTS
The accompanying unaudited financial statements present the results of
operations and cash flows of RAM Energy, Inc. for the three-month periods ended
March 31, 1997 and 1998. These financial statements include all adjustments,
consisting of normal and recurring adjustments, which, in the opinion of
management, were necessary for a fair presentation of the financial position
and the results of operations for the indicated periods. The results of
operations for the three months ended March 31, 1998 are not necessarily
indicative of the results to be expected for the full year ending December 31,
1998.
NATURE OF OPERATIONS AND ORGANIZATION
RAM Energy, Inc. (the "Company") operates exclusively in the oil and natural
gas industry with activities including the drilling, completion and operation
of oil and natural gas wells, and operation of gathering and disposal systems.
The Company conducts the majority of its operations in the states of Oklahoma,
Texas and New Mexico.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of its majority or
wholly-owned subsidiaries including the operations of Carlton Resources
Corporation since its acquisition effective March 1, 1998 (Note 2). All
significant intercompany transactions have been eliminated.
2. BUSINESS ACQUISITION
On February 24, 1998, the Company acquired Carlton Resources Corporation
("Carlton") in a stock acquisition accounted for as a purchase, for
approximately $42.6 million, before closing adjustments. The operations of
Carlton are included in the accompanying financial statements since March 1,
1998. The preliminary allocation of the purchase price to the assets and
liabilities acquired was as follows:
Properties and equipment:
Oil and gas properties $25,000,000
Pipeline gathering systems 39,000,000
-----------
64,000,000
Other assets and liabilities, net (844,000)
Deferred income tax liability (20,556,000)
-----------
Purchase price $42,600,000
===========
The following unaudited pro forma results of operations gives effect to the
acquisition as if consummated on January 1, 1997. The data reflects adjustments
of the historical Carlton results for depreciation and amortization of the
property and equipment acquired, adjustments of expenses resulting from
contractual requirements of the acquisition agreement and incremental interest
expense relating to the sale in February 1998 of the Company's Senior Notes
(Note 3) used to finance the purchase and repay existing debt. The pro forma
adjustments are based upon available information and assumptions that
management of the Company believes are reasonable. The pro forma results of
operations data does not purport to represent the results of operations which
would have occurred had such transaction been consummated on January 1, 1997
or the Company's results of operations for any future date or period.
THREE MONTHS ENDED
MARCH 31,
1997 1998
----------- -----------
Total operating revenues $12,703,000 $ 9,043,000
Net income (loss) $ 471,000 $(1,655,000)
Net income (loss) per common share $0.17 $(0.61)
3. LONG-TERM DEBT
Long-term debt consists of the following:
DECEMBER 31, 1997 MARCH 31, 1998
----------------- --------------
11-1/2% Senior Notes due 2008(A) $ - $113,341,835
Revolving note payable(B) 55,000,000 10,000,000
Term note payable(B) 7,000,000 -
Installment loan agreements 225,165 290,320
----------- ------------
62,225,165 123,632,155
Less amount due within one year 97,723 118,608
----------- ------------
$62,127,442 $123,513,547
=========== ============
(A) In February 1998, the Company completed the sale of $115 million of 11-
1/2% Senior Notes ("Notes") Due 2008 in a public offering ("Offering").
The proceeds, net of offering costs of $5,005,720 and discount of
$1,672,100 were used principally to pay the outstanding balance under its
existing Credit Facility ("Credit Facility") and to acquire Carlton (Note
2).
The Notes are senior unsecured obligations of the Company and are redeem-
able at the option of the Company in whole or in part, at any time on or
after February 15, 2005 at prices ranging from 111.50% to 103.84%
of face amount to their scheduled maturity in 2008.
The indenture under which the Notes are issued contains certain covenants
including covenants that limit (i) incurrences of additional indebtedness
and issuances of disqualified capital stock, (ii) restricted payments,
(iii) dividends and other payments affecting subsidiaries, (iv) trans-
actions with affiliates and outside directors' fees, (v) asset sales,
(vi) liens, (vii) lines of business, (viii) merger, sale or consolidation
and (ix) non-refundable acquisition deposits.
(B) At December 31, 1997, an aggregate of $62.0 million was outstanding under
the Credit Facility (aggregate rate of 8.8%) with Union Bank of
California, N.A. and Den Norske Bank ASA. The term portion ($7.0 million)
was to mature in June 1998 and the revolving credit portion ($55.0 mil-
lion) was to amortize quarterly over four years commencing in June 1998.
The Company and Union Bank have amended and restated the Credit Facility,
effective upon consummation of the Offering.
The Credit Facility, as amended and restated, provides for a $50.0
million revolving commitment which is payable in full in February 2003.
At March 31, 1998, $10 million is outstanding under the Credit Facility.
Advances under the amended Credit Facility bear interest on a sliding
scale based on the ratio of the aggregate amount outstanding to the
borrowing base. The applicable rate may, at the Company's option, be
based either on the Eurodollar rate or the Union Bank base rate, with the
rates ranging from the Eurodollar rate plus 1.375% to 2.0% or the Union
Bank base rate plus 0.0% to 0.5% (7.8% on outstanding balance at March
31, 1998). The Company is required to pay a commitment fee on the amount
by which the borrowing base exceeds the aggregate amount outstanding
under the Credit Facility. All amounts outstanding under the Credit
Facility are secured by a lien on all oil and gas reserves, wells, per-
sonal property and contract rights of the Company.
The amount of credit available at any time under the amended and restated
Credit Facility may not exceed the borrowing base which, initially, is
$25.0 million, and will be redetermined semi-annually. The Credit
Facility contains customary covenants which, among other things, require
periodic financial and reserve reporting and limit the Company's incur-
rence of indebtedness, liens, dividends, loans, mergers, transactions
with affiliates, investments and sales of assets.
In addition, the credit agreement requires the Company to enter into
certain interest rate swaps and collars to hedge the interest rate ex-
posure associated with the credit agreement. Effective January 3, 1997,
the Company entered into interest rate swaps to fix the interest rate
on notional amounts of $20.0 million of the borrowings under the revolving
commitment and entered into an interest rate collar to cap the interest
rate on an additional notional amount of $10.0 million of the borrowings
under the revolving commitment. In connection with the repayment of the
outstanding balance on the Credit Facility in February 1998, the Company
terminated the interest rate collar, and an interest rate swap with a
notional amount of $10 million, for a total cash payment of $130,000.
Such payment was expensed in the first quarter of 1998. At March 31,
1998, the Company has outstanding interest rate swaps on the $10.0 mil-
lion of borrowings outstanding.
Interest paid by the Company in the three-month periods ended March 31, 1997
and 1998 totaled $1,310,051 and $1,240,673, respectively.
4. FIXED-PRICE CONTRACTS
The Company periodically enters into certain fixed price delivery contracts to
reduce its exposure to unfavorable changes in natural gas prices. These
contracts allow the Company to predict with greater certainty the effective gas
prices to be received from its hedged production. As of March 31, 1998, these
fixed-price contacts are in place to hedge 6.7 BCF of the Company's estimated
future production through March 1999 from proved gas reserves at a weighted
average price of $2.84 per MCF.
5. FINANCIAL INSTRUMENTS
The following information is provided regarding the estimated fair value of
financial instruments employed by the Company as of March 31, 1998 and the
method and assumptions used to estimate the fair value of such financial
instruments:
The carrying amounts reported in the accompanying balance sheet for cash
and cash equivalents and long-term debt approximate their fair values.
The carrying value of the Company's interest rate swaps at March 31, 1998
exceeded the fair value by approximately $204,000, representing the
amount the Company would be required to pay to terminate the contracts at
such date.
6. INCOME TAXES
Deferred income taxes of the Company reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes, and
are principally those resulting from the acquisition of Carlton in February
1998 (Note 2). Significant components of the Company's deferred tax assets and
liabilities are as follows:
<TABLE>
<CAPTION>
December 31, 1997 March 31, 1998
----------------- --------------
<S> <C> <C>
Deferred tax assets
Financial depreciation in excess of tax depreciation $ 108,163 $ 108,000
Financial charges which are deferred for tax purposes 157,000 157,000
Net operating loss carryforwards 2,742,089 3,624,000
Investment tax credits - 284,000
Other - 1,014,000
----------- -----------
Total deferred tax assets before valuation allowance 3,007,252 5,187,000
Less valuation allowance recognized (1,293,153) -
----------- -----------
Net deferred tax assets 1,714,099 5,187,000
Deferred tax liabilities
Intangible drilling costs capitalized for financial purposes
and expensed for tax purposes 1,714,099 2,596,000
Pre-acquisition basis difference resulting from debt
restructuring - 6,951,000
Financial basis of assets acquired in excess of tax basis - 15,692,000
----------- -----------
Deferred tax liabilities 1,714,099 25,239,000
----------- -----------
Net deferred tax $ - $20,052,000
=========== ===========
</TABLE>
The credit recognized for income taxes in 1998 reflects deferred income taxes
since the acquisition of Carlton as of March 1, 1998 for accounting purposes.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
RAM Energy, Inc. is an independent oil and gas company engaged in the
acquisition, development and production of oil and gas properties primarily
in the Mid-Continent Area and the Permian Basin. The Company also operates
gathering and disposal systems in Oklahoma.
In late February 1998, the Company acquired Carlton Resources
Corporation ("Carlton" or the "Carlton Acquisition"), in an acquisition of
stock accounted for as a purchase, for approximately $42.6 million. With
the acquisition of Carlton, the Company acquired estimated net proved
reserves of approximately 35 Bcfe located in the Mid-Continent Area and
Permian Basin, as well as an oil and gas gathering system and salt water
disposal facility located in Oklahoma. The results of operations discussed
below include the operations of Carlton, on a consolidated basis, for the
month of March 1998.
The 165-mile gathering system transports gas in one transportation line
and liquids in the form of salt water and oil in a separate transportation
line. Fees are based on various contracts at both fixed prices per unit of
volume, and percentage of sales proceeds for gas. The system serves both
the Company and third parties, but reported revenues are those derived from
third parties only.
Pro forma for the Carlton Acquisition, RAM Energy's proved oil and gas
reserves at December 31, 1997 were 4.2 MMbls and 111.6 Bcf, for a total of
137.0 Bcf of natural gas equivalent. At December 31, 1997 the SEC PV-10
value of RAM Energy's oil and gas reserves, on a pro forma basis, was
$126.1 million on a pre-tax basis, computed using average prices of $16.02
per Bbl of oil and $2.70 per Mcf of natural gas. The SEC PV-10 value
excludes the value of the gas gathering system acquired with the Carlton
purchase.
The Carlton Acquisition was financed by completion of the public
issuance of $115.0 million in Senior Notes due 2008 (the "Notes Offering").
Net proceeds of the Notes Offering were used to purchase Carlton, to repay
existing debt, and for working capital.
The Company has entered into fixed price delivery arrangements for
natural gas production through March 1999, effectively establishing fixed
prices or floor prices ranging from $2.52 per Mcf to $3.23 per Mcf on an
average of 17,000 Mcf per day from April through September 1998 and an
average of 15,000 Mcf per day from October 1998 through March 1999.
Prior to November 1996, the principal operations of the Company were
that of serving as managing general partner of an institutional limited
partnership. Effective December 1, 1996 the Company acquired substantially
all of the partnership's operations for approximately $59.0 million. With
this acquisition, the Company added approximately 109 Bcfe of reserves.
Historically the Company has added reserves mainly through acquisitions,
as described above, and development. In 1997 the Company incurred $17.6
million in acquisition and development costs. For 1998 the Company has
budgeted approximately $20.3 million for development projects and certain
exploration activity, exclusive of acquisitions. The Company intends to
continue to pursue attractive oil and gas acquisitions and exploratory
opportunities.
The Company's revenue, profitability and cash flow are substantially
dependent upon prevailing prices for oil and gas and the volumes of oil and
gas it produces. In addition, the Company's proved reserves and oil and
gas production will decline as oil and gas are produced unless the Company
is successful in acquiring producing properties or conducts successful
exploration and development drilling activities.
The Company uses the full cost method of accounting for its investment
in oil and gas properties. Under the full cost method of accounting, all
costs of acquisition, exploration and development of oil and gas reserves
are capitalized into a "full cost pool" as incurred, and properties in the
pool are amortized and charged to operations using the future recoverable
units of production method based on the ration of current production to
total proved reserves, computed based on current prices and costs.
Significant downward revisions of quantity estimates or declines in oil and
gas prices that are not offset by other factors could result in a writedown
for impairment of the carrying value of oil and gas properties. Once
incurred, a writedown of oil and gas properties is not reversible at a
later date, even if oil or gas prices increase.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH
31, 1997
OPERATING REVENUES. Operating revenues decreased by $294,000, or 4.1%
for the three months ended March 31, 1998, compared to the year earlier
period. Results for the three month period in 1998 include one month of
operations of Carlton. The Carlton Acquisition was completed February 24,
1998. The following table summarizes production volumes, average sales
prices and period to period comparisons, including the effect on operating
revenues, for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED 1998 COMPARED TO 1997
MARCH 31, -------------------------------
------------------ % INCREASE OPERATING REVENUE
1997 1998 (DECREASE) INCREASE (DECREASE)
------- ------- ---------- -------------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Production volumes:
Natural gas (Mmcf) 1,788 2,086 16.7% $ 854
Oil (Mbbls) 91 90 (1.1)% (22)
Average sale prices:
Natural gas (per Mcf) $ 2.87 $ 2.29 (20.0)% $ (1,197)
Oil (per Bbl) 21.74 14.65 (32.6)% (637)
</TABLE>
Revenues were lower in the first quarter of 1998 as compared to the
first quarter of 1997 with a 12.5% increase in production, more than offset
by a 23.7% decrease in realized prices, both on an Mcfe basis. Average
daily production was 29.2 million cubic feet of natural gas equivalent in
the first quarter of 1998 compared to 25.9 million cubic feet of natural
gas equivalent during the first quarter of 1997, an increase of 12.5%.
Natural gas production increased by 16.7% and oil production decreased 1.1%
for the comparable periods. The average realized sales price for natural
gas was $2.29 per Mcf for the quarter ended March 31, 1998, compared to
$2.87 per Mcf for the year-ago quarter, a decrease of 20.0%. The average
realized oil price for the quarter ended March 31, 1998 was $14.65 per Bbl,
and for the quarter ended March 31, 1997 was $21.74 per Bbl, a 32.6%
decrease. The increase in natural gas production was mainly attributable
to the Carlton Acquisition, off-set by the natural decline of the Company's
properties. The Carlton Acquisition added 5.9 Mmcf per day and 191 Bbls
per day to recorded revenues.
OIL AND GAS PRODUCTION EXPENSE. Oil and gas production expense
increased by $182,000, or 11%, for the three months ended March 31, 1998,
compared to the same period in 1997. The oil and gas production expense
was $.70 per Mcfe for the first three months of 1998, a decrease from $.71
per Mcfe in the first three months of 1997. The increase in expense was
due primarily to the addition of Carlton's operation for the month of March
1998.
GATHERING SYSTEM. The gathering system is a component of the
operations of Carlton. Revenues from this source were $666,000 for the
month of March 1998. Carlton is also obligated to deliver 10,000 Mmbtu's
per day at the tail-gate of the system, and purchases outside gas to
satisfy that obligation. Outside purchases were $447,000 for the month of
March 1998 and system operating costs were $37,000.
DEPRECIATION AND AMORTIZATION ("D&A") EXPENSE. Depreciation and
amortization expenses increased $813,000, or 44% for the first three months
of 1998 over the same period in 1997, and was $1.01 per Mcfe for the 1998
quarter, an increase of $.22, or 27.8%, compared to the $.79 per Mcfe for
the 1997 quarter. This increase is due primarily to the inclusion of
Carlton's operations for the month of March 1998 with a higher purchase
price per Mcfe than the Company's cost basis prior to the acquisition, as
well as the depreciation of Carlton's gathering system. For oil and gas
D&A only, the results were $.89 per Mcfe for the 1998 quarter (including
one month of Carlton's production) compared with $.73 per Mcfe for the
1997 quarter, a 21% increase.
G & A EXPENSE. General and administrative expense increased
$338,000, or 44%, in the first three months of 1998 over the same period of
1997 due primarily to the increase in the number of employees. Though the
Company has eliminated most duplications with Carlton personnel, it has
hired additional employees to handle the significant capital expenditure
program for the year.
INTEREST EXPENSE. Interest expense increased to $2.4 million for the
three months ended March 31, 1998 compared to $1.3 million for the
comparable period of the preceding year. This increase was attributable to
higher average outstanding indebtedness and higher effective interest
rates, both resulting from the Notes Offering.
INCOME TAXES. In connection with the Carlton Acquisition, the Company
recorded deferred income taxes related to the excess of financial bases of
net assets acquired (principally properties and equipment) over their
respective bases for income tax purposes. Such net liability results in
the Company providing for income taxes or credits after the date of the
Carlton Acquisition. Prior to such date, the Company's existing net
operating loss carryforwards and the provision or credit for income taxes
had been offset by valuation allowances.
NET INCOME. Due to the factors described above, net income
decreased $2,650,035, or 169%, from a net income of $1,569,699 in the first
three months of 1997, to a net loss of $1,080,336 in the same period of
1998.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998 the Company had cash and cash equivalents of $11.3
million.
As of March 31, 1998 the Company had $123.5 million of indebtedness
outstanding. This was comprised of $115.0 million of Senior Notes due 2008
issued in late February 1998, and $10.0 million of advances under the
Credit Facility discussed below. Net proceeds of the Notes Offering were
used to repay existing debt, purchase Carlton, and for working capital.
Pursuant to the Indenture governing the Senior Notes, the Company may incur
up to $30.0 million in Permitted Indebtedness (as defined). Subject to
certain limitations in the Indenture, the Company may incur additional
indebtedness, including indebtedness under the Credit Facility. See "--
Credit Facility."
Funding for the Company's business activities has historically been
provided by operating cash flow and reserve-based bank borrowings. The
Company regularly engages in discussions relating to potential acquisitions
of oil and gas properties or companies engaged in the oil and gas business.
The Company has no present agreement, commitment or understanding with
respect to any such acquisitions. Any future acquisitions may require
additional financing which will be dependent upon financing arrangements,
if any, available at the time.
CREDIT FACILITY. The Company has a $50 million revolving credit
facility ("Credit Facility") with Union Bank of California, N.A. ("Union
Bank") and Den Norske Bank, S.A. The Credit Facility provides for a $50.0
million revolving commitment payable in full in February 2003. Advances
under the Credit Facility will bear interest on a sliding scale based on
the ratio of the aggregate amount outstanding to the borrowing base. The
applicable rate may, at the Company's option, be based either on the
Eurodollar rate or the Union Bank base rate, with the rates ranging from
the Eurodollar rate plus 1.375% to 2.0% or the Union Bank base rate plus
0.0% to 0.5%. The Company is required to pay a commitment fee on the
amount by which the borrowing base exceeds the aggregate amount outstanding
under the Credit Facility. All amounts outstanding under the Credit
Facility are secured by a lien on all oil and gas reserves, wells, personal
property and contract rights of the Company.
The amount of credit available at any time under the amended and
restated Credit Facility may not exceed the borrowing base which,
initially, is $25.0 million, and will be redetermined semi-annually. The
Credit Facility contains customary covenants which, among other things,
require periodic financial and reserve reporting and limit the Company's
incurrence of indebtedness, liens, dividends, loans, mergers, transactions
with affiliates, investments and sales of assets.
NET CASH PROVIDED BY OPERATING ACTIVITIES. For the three months ended
March 31, 1998 net cash provided by the Company's operating activities was
$.9 million compared to $3.7 million for the comparable period in 1997.
Although production increased for the three months ended March 31, 1998
compared to the comparable period in 1997, this increase was more than off-
set by the decline in realized price declines for both natural gas and oil.
NET CASH USED IN AND PROVIDED BY INVESTING ACTIVITIES. For the three
months ended March 31, 1998 net cash used in the Company's investing
activities was $46.3 million, comprised primarily of the Carlton
Acquisition adjusted purchase price of $42.6 million, and $3.6 million in
drilling activities. This compares with $8.4 million provided in 1997,
which included the sale of oil and gas properties of $9.7 million. The
Company has budgeted $20.3 million for capital expenditures in 1998,
exclusive of acquisitions. The Company expects to use cash flow from
operations, cash balances and borrowings under the Credit Facility to fund
these expenditures.
YEAR 2000. All of the Company's computers and operating systems are
Year 2000 compliant. Mainframe business software will be modified during
1998 and 1999 at a cost estimated to be less than $100,000.
THIS DOCUMENT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE FORWARD-LOOKING
STATEMENTS CONTAINED IN THIS RELEASE ARE STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES INCLUDING, BUT NOT LIMITED TO, MARKET DEMAND, THE EFFECT OF
ECONOMIC CONDITIONS, THE RESULT OF FINANCING EFFORTS AND RISKS DETAILED IN
RAM'S SECURITIES AND EXCHANGE COMMISSION FILINGS.
<PAGE>
Item #6 Exhibits and Reports on Form 8-K
A. Exhibits
Exhibit 27. Financial Data Schedule
B. Reports on Form 8-K
The following reports on Form 8-K have been filed since
January 1, 1998.
On March 10, 1998, the Company filed a current report on
Form 8-K reporting under Items 2, 5 and 7 the acquisition of Carlton
Resources Corporation on February 24, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
RAM ENERGY, INC.
(Registrant)
Date: May 14, 1998 By: LARRY E. LEE
Larry E. Lee
President and Chief Executive
Officer
By: JOHN M. LONGMIRE
John M. Longmire
Senior Vice President and
Treasurer and Chief Financial
Officer
<PAGE>
<TABLE>
EXHIBIT INDEX
<CAPTION>
Exhibit No. Description Method of Filing
- ----------- ----------- ----------------
<S> <C> <C>
27 Financial Data Schedule Filed herewith electronically
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001051191
<NAME> RAM ENERGY, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 11,347,793
<SECURITIES> 0
<RECEIVABLES> 5,539,478
<ALLOWANCES> 351,605
<INVENTORY> 0
<CURRENT-ASSETS> 18,052,403
<PP&E> 143,870,710
<DEPRECIATION> (18,131,494)
<TOTAL-ASSETS> 150,989,289
<CURRENT-LIABILITIES> 11,277,771
<BONDS> 123,513,547
0
0
<COMMON> 27,270
<OTHER-SE> (5,090,594)
<TOTAL-LIABILITY-AND-EQUITY> 150,989,289
<SALES> 6,761,140
<TOTAL-REVENUES> 6,820,017
<CGS> 2,327,398
<TOTAL-COSTS> 6,089,879
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (98,281)
<INTEREST-EXPENSE> 2,381,872
<INCOME-PRETAX> (1,584,336)
<INCOME-TAX> 504,000
<INCOME-CONTINUING> (1,080,336)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,080,336)
<EPS-PRIMARY> (0.40)
<EPS-DILUTED> 0.00
</TABLE>
