Cano Petroleum Announces FY 2007 Second Quarter Results and Earnings Call and Provides an Operational Summary.FORT WORTH, Texas Fort Worth is the fifth-largest city in the state of Texas, 18th-largest city in the United States[1], and voted one of "America’s Most Livable Communities. -- Cano Petroleum, Inc. (AMEX AMEX See: American Stock Exchange :CFW CFW Custom Firmware CFW Call Forward CFW Cystic Fibrosis Worldwide CFW Cache Fast Write CFW Citizens for Florida's Waterways CFW Center for Writing (education) CFW Continuous Fillet Weld (engineering) ) today announced its financial results for its fiscal year second quarter ended December 31, 2006. Following are selected financial highlights from the Company's 10-Q. Second Quarter Results For the quarter ended December 31, 2006 ("current quarter"), Cano's revenues were $6.9 million, which is $3.7 million, or 118%, higher than the same period last year. For the current quarter, the company recorded a net loss of $1.4 million, or $0.04 per share, as compared to a net loss of $1.5 million, or $0.06 per share, in the same period last year. Overall, the increased revenues of $3.7 million and lower hedging losses of $0.9 million were offset by increased operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. of $3.3 million and the preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. dividend of $1.0 million. The $3.7 million revenue increase was driven by higher sales. For the current quarter, Cano's sales were 68 MBbls of oil and 346 MMcf of natural gas, or 126 MBOE MBOE Thousands of Barrels of Oil Equivalent MBOE Milford Board of Education , a 133% increase when compared to the quarter ended December 31, 2005 ("prior year quarter"). During the current quarter, the average prices the Company received for its oil and natural gas, including hedge reimbursements, were $58.70 per barrel of oil and $8.39 per Mcf of gas, respectively. For the prior year quarter, oil sales were 36 MBbls at an average price of $57.14 per barrel and natural gas sales were 111 MMcf at an average price of $8.97 per Mcf. The increases were primarily related to increased production volumes reflecting the acquisitions of W.O. Operating and Pantwist properties in November 2005 and April 2006, respectively. We also had higher sales from our other fields due to bringing existing non-producing wells to production and increased natural gas sales at the Desdemona Field. This is further discussed below under "Operations Developments." During the current quarter, there was an unrealized loss Unrealized Loss A loss that results from holding onto an asset rather than cashing it in and officially taking the loss. Notes: Let's say you own a stock that is down 50%, but you haven't sold it to realize the loss yet. This is said to be an unrealized loss. on hedge contracts of $0.7 million, which is a $0.9 million improvement as compared to the prior year quarter. This loss reflects the mark to market valuation of the derivatives in place at December 31, 2006 for our floors on oil and natural gas. (See schedule attached). During the current quarter, our operating expenses were $6.9 million, or $3.3 million higher than the same period last year. Increases to our lease operating expenses ("LOE LOE Ley Orgánica de Educación (Spanish) LOE Level Of Effort LOE Limited Objective Experiment LOE Letter of Explanation LOE Language Other than English. ") of $1.2 million, depreciation / depletion expense of $0.9 million, and production / ad valorem taxes Ad Valorem Tax A tax based on the assessed value of real estate or personal property. In other words ad valorem taxes can be property tax or even duty on imported items. Property ad valorem taxes are the major source of revenues for state and municipal governments. of $0.4 million were driven by higher sales, as previously discussed. For the current quarter, our LOE per BOE BOE Based on Experience BOE Board of Education BOE Boletín Oficial del Estado (Spanish) BOE Bank of England BOE Board of Equalization BOE Board of Elections BOE Barrel of Oil Equivalent BOE Bind on Equip was $19.62, which is $3.15 better than the same period last year. The $3.15 reduction is attributed to increased operational efficiency. General and administrative ("G&A") expenses of $2.7 million increased $0.9 million over the prior year quarter. In addition to increased headcount this year, the quarter included additional legal expenses associated with the fire litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. and increased accounting fees to achieve compliance with the Sarbanes-Oxley Section 404 requirements. The preferred dividends preferred dividend n. a payment of a corporation's profits to holders of preferred shares of stock. (See: preferred stock) of $1.0 million resulted from the $80.9 million issuance of preferred and common equity during September 2006. The cash proceeds were used to repay $68.75 million of long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. , for general purposes, and to fund our capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. plan, as discussed below. The preferred stock has a 7.875% dividend rate. Six Months To-Date Results For the six months ended December 31, 2006 ("current six months"), Cano's revenues were $15.6 million, which is $10.5 million, or 204%, higher than the same period last year. For the current six months, the company recorded a net loss of $2.0 million, or $0.07 per share, which is comparable to the net loss of $1.9 million, or $0.09 per share, in the same period last year. Overall, the increased revenues of $10.5 million and lower hedging losses of $1.5 million were offset by increased operating expenses of $8.7 million, increased interest expenses of $1.7 million and the preferred stock dividend of $1.2 million. The $10.5 million revenue increase resulted from both higher sales and prices. For the current six months, Cano's sales were 141 MBbls of oil and 721 MMcf of natural gas, or 261 MBOE, a 193% increase when compared to the same period last year. During the current six months, the average prices that we received for our oil and natural gas sales, including hedge reimbursements, were $64.14 per barrel of oil and $9.03 per Mcf of gas, respectively. For the six month period ended December 31, 2005, the prices received were $58.55 per barrel of crude oil and $8.22 per Mcf of gas. The increase in oil and gas sales is attributable to the same factors as previously discussed. The $8.7 million increase in operating expenses includes higher LOE costs of $3.4 million, higher depreciation / depletion expense of $1.7 million and increased production / ad valorem taxes of $0.9 million resulting from higher sales, as previously discussed. For the current six months, the LOE per BOE was $20.74, which is an improvement of $1.51 per BOE as compared to the same period last year and is attributable to increased operating efficiency. Increases in G&A expenses of $2.7 million and preferred stock dividend of $1.2 million are attributable to the same factors previously discussed. For the current six months, the $2.1 million interest expense is $1.7 million higher than the same period last year. Of the $2.1 million, only $0.2 million was incurred during the three months ended December 31, 2006. The reduced interest expense resulted from the repayment of long-term debt totaling $68.75 million from the September 2006 financing, as previously discussed. Operations Developments We have fully focused on executing our fiscal year development plan. Through December 31, 2006, we have expended ex·pend tr.v. ex·pend·ed, ex·pend·ing, ex·pends 1. To lay out; spend: expending tax revenues on government operations. See Synonyms at spend. 2. approximately $10.5 million of our $40.9 million FY Capital Budget. Our primary areas of emphasis are: * Panhandle Field: Execution of Phase I of our waterflood development plan at the Cockrell Ranch Unit is in progress. We expect to begin Phase I water injection during the second calendar quarter of 2007 and anticipate a preliminary response from the waterflood by the fourth calendar quarter of 2007. * Desdemona Field - Barnett Shale The Barnett Shale is a geological formation of economic significance. It consists of sedimentary rocks of Mississippian age in the U.S. State of Texas. The formation is estimated to stretch from the city of Dallas to west of the city of Fort Worth and south, covering 5,000 square : Due to the encouraging initial results of our Barnett Shale drilling program, we have increased our 2007 FY Capital Budget allocable to this program to roughly $10 million for a total of 14 vertical wells and 4 horizontal infill wells. As we have previously mentioned, we intend to test both the Marble Falls and Barnett Shale in this 10,000 acre field and support a development plan to monetize both horizons. * Desdemona Field Waterflood: We expect regulatory approvals to initiate water injection in the second calendar quarter of 2007, and anticipate an initial waterflood response in the fourth calendar quarter of 2007. * Nowata Field: We have completed the budgeted workovers to return 15 wells to production. The pilot plant design is complete and we have sourced surfactants, polymers and equipment for a scheduled second calendar quarter 2007 start-up of an Alkaline Surfactant Surfactant Definition Surfactant is a complex naturally occurring substance made of six lipids (fats) and four proteins that is produced in the lungs. It can also be manufactured synthetically. Polymer ("ASP") pilot. First ASP response is anticipated in the first calendar quarter of 2008. * Corsicana: We have drilled and completed 16 pattern replacement wells and plan to reinstate To restore to a condition that has terminated or been lost; to reestablish. To reinstate a case, for example, means to restore it to the same position it had before dismissal. a prior waterflood development in this field. Once waterflood response and laboratory results are analyzed, we anticipate implementing an ASP pilot in the field in the fourth calendar quarter of 2007. * Davenport Field Davenport Field is a baseball stadium in Charlottesville, Virginia. It is the home field of the University of Virginia Cavaliers college baseball teams. The stadium holds 2,924 fans and opened in 2002. It is named after former UVA executive director, Ted Davenport. : Initial results of the workover operations have been encouraging and production increases have exceeded expectations. Contingent upon Adj. 1. contingent upon - determined by conditions or circumstances that follow; "arms sales contingent on the approval of congress" contingent on, dependant on, dependant upon, dependent on, dependent upon, depending on, contingent successful laboratory studies, we anticipate initiating an ASP pilot project in this field in the FY 2008 timeframe. Management Comments Jeff Johnson, Cano's Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , stated, "Our execution of the capital budget is proceeding as planned. We continue to experience significant growth and anticipate the benefits of our capital expenditures to support continued growth." Earnings Call The Company will hold an earnings call to discuss fiscal second quarter results and provide an update on its operations on Monday, February 12, 2007, at 3:00 P.M. Eastern Time (2:00 P.M. Central Time). Interested parties can participate in the call by dialing (866) 825-3308 or (617) 213-8062 (outside the U.S.). The passcode is 30368290. This call is being webcast by Thomson/CCBN and can be accessed at Cano's website at www.canopetro.com. The webcast is also being distributed through the Thomson StreetEvents Network. Individual investors can listen to the call at www.earnings.com, Thomson's individual investor portal, powered by StreetEvents. Institutional investors can access the call via Thomson StreetEvents (www.streetevents.com), a password-protected event management site. [TABLE OMITTED] [TABLE OMITTED] See Form 10-Q Form 10-Q See 10-Q. and accompanying notes to these unaudited financial statements. [TABLE OMITTED] See Form 10-Q and accompanying notes to these unaudited financial statements. [TABLE OMITTED] See Form 10-Q and accompanying notes to these unaudited financial statements. ABOUT CANO PETROLEUM: Cano Petroleum Inc. is an independent Texas-based energy producer with properties in the mid-continent region of the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . Led by an experienced management team, Cano's primary focus is on increasing domestic production from proven fields using enhanced recovery methods. Cano trades on the American Stock Exchange American Stock Exchange (AMEX) Stock exchange in the U.S. Originally known as “the Curb,” it began as an outdoor marketplace in New York City c. 1850. It moved indoors to its present location in the Wall Street area in 1921. under the ticker symbol Ticker Symbol An arrangement of characters (usually letters) representing a particular security listed on an exchange or otherwise traded publicly. When a company issues securities to the public marketplace, it selects an available ticker symbol for its securities which investors CFW. Additional information is available at www.canopetro.com. Safe-Harbor Statement -- Except for the historical information contained herein, the matters set forth in this news release are "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 company intends that all such statements be subject to the "safe-harbor" provisions of those Acts. Many important risks, factors and conditions may cause the company's actual results to differ materially from those discussed in any such forward-looking statement. These risks include, but are not limited to, estimates or forecasts of reserves, estimates or forecasts of production, future commodity prices, exchange rates, interest rates, geological and political risks, drilling risks, product demand, transportation restrictions, the ability of Cano Petroleum, Inc. to obtain additional capital, and other risks and uncertainties described in the company's filings with the Securities and Exchange Commission. The historical results achieved by the company are not necessarily indicative of its future prospects. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. |
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