Cano Petroleum Announces Third Quarter 2006 Results.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: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 the third quarter ended March 31, 2006. Following are selected financial highlights from the Company's 10-QSB: Third Quarter Results For the three months ended March 31, 2006, Cano reported a net loss of $1.131 million, or $.05 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, on revenues of $5.423 million. The net loss included a loss on derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. hedging hedging, in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market. instruments of $1.275 million. For the three months ended March 31, 2005, Cano recorded a net loss of $775 thousand, or $.07 per diluted share, on revenues of $1.462 million. For the three months ended March 31, 2006, Cano's sales were 57 MBbls of oil and 229 MMcf of natural gas, or 96 MBOE MBOE Thousands of Barrels of Oil Equivalent MBOE Milford Board of Education , a 210% increase when compared to the quarter ended March 31, 2005. During the current reporting period, the average prices the Company received for its oil and natural gas were $61.95 per barrel barrel: see English units of measurement. and $8.08 per Mcf, or $56.49 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 . For the same period ending March 31, 2005, oil sales were 24 MBbls at an average price of $49.39 per barrel and natural gas sales were 41 MMcf at an average price of $5.60 per Mcf, or 31 MBOE at an average price of $47.16 per BOE. Operating revenue operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. for the three-month period ended March 31, 2006, was $5.423 million, up 71% compared to $3.163 million for the prior three-month period ended December December: see month. 31, 2005. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. for the three-month period ended March 31, 2005, was $368 thousand, compared to an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $407 thousand for the previous quarter. The increase was primarily related to increased production volumes due to receiving three full months of production from the Panhandle panhandle, in geography, a strip of land projecting from the main body of an area and shaped like the handle of a pan, such as the panhandles of West Virginia, Texas, and Alaska. acquisition and increased oil and gas prices. Nine months Results For the nine months ended March 31, 2006, Cano reported a net loss of $3.076 million, or $.14 per diluted share. Included in the net loss was $497 thousand of operating loss, as well as the loss on hedging contracts of $2.910 million. For the nine months ended March 31, 2005, Cano recorded a net loss of $2.150 million, or $.24 per diluted share, which included $2.160 million of operating loss. For the nine months ended March 31, 2006, Cano's sales were 120 MBbls of oil and 394 MMcf of natural gas, or 186 MBOE, a 121% increase when compared to the nine months ended March 31, 2005. During the current nine month reporting period, the average prices the Company received for its oil and natural gas were $60.69 per barrel and $8.14 per Mcf, or $56.62 per BOE. For the same period ending March 31, 2005, oil sales were 62 MBbls at an average price of $47.78 per barrel and natural gas sales were 133 MMcf at an average price of $5.94 per Mcf, or 84 MBOE at an average price of $45.00 per BOE. Operating revenue for the nine-month period ended March 31, 2006, was $10.532 million, up 179% compared to $3.780 million for the nine-month period ended March 31, 2005. The increase was primarily related to increased production volumes due to the Panhandle acquisition and increased oil and gas prices. Balance Sheet Review At March 31, 2006, current assets Current Assets Appearing on a company's balance sheet, it represents cash, accounts receivable, inventory, marketable securities, prepaid expenses, and other assets that can be converted to cash within one year. were $5.033 million, which included $1.319 million of cash. Current liabilities Current Liabilities Usually appearing on a company's balance sheet, it represents the amount owed for interest, accounts payable, short-term loans, expenses incurred but unpaid, and other debts due within one year. were $1.548 million and 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. was $42.750 million. The Company's credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities as of March 31, 2006 had $2 million available. As of March 31, 2006, the Company's net capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. costs associated with its oil and gas properties and other equipment were $106.487 million. Its stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. was $39.482 million. Hedging Activities Pursuant to Cano's senior and subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. credit agreements, the Company was required to enter into financial contracts in second quarter of Fiscal 2006 to hedge its exposure to commodity price risk associated with expected oil and gas production. For calendar years 2006, 2007, and 2008, the hedged hedge n. 1. A row of closely planted shrubs or low-growing trees forming a fence or boundary. 2. A line of people or objects forming a barrier: a hedge of spectators along the sidewalk. production amounts, as expressed in barrels of oil equivalent per day, are 832, 781, and 735, respectively. Cano entered into financial contracts to set the following price floors for calendar years 2006 through 2008: --Crude oil production of $60/barrel for 2006, and $55/barrel for 2007 and 2008. --Natural gas production of $8.50/mcf, $8.00/mcf, and $7.50/mcf for 2006, 2007, and 2008, respectively. The Company has no derivative hedging contracts that set a price ceiling. Therefore, it is entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: to 100% of its revenue receipts and, if crude oil and natural gas NYMEX See New York Mercantile Exchange. NYMEX See New York Mercantile Exchange (NYM). prices are lower than the price floor, it will be reimbursed for the difference between the NYMEX price and floor price. During the three- and nine-month periods ended March 31, 2006, there were settlements under our derivative agreements due to Cano amounting to $140,996, which is included in our Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: Statements of Operations under "Crude Oil and natural gas sales." The settlements were cumulative monthly payments due to Cano since the NYMEX gas price was lower than the $8.50 "floor gas price." The cash flows relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the derivative instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. are reflected in operating activities on our statements of cash flow. 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, "We are very pleased with the company's progress over the last quarter. We turned a significant corner during the quarter, producing net operating income for the first time. We anticipate that this trend will continue, barring a substantial decrease in commodity prices." FINANCIAL STATEMENTS AND SCHEDULES FOLLOW
CANO PETROLEUM CORPORATION
Operating Revenue Summary
Three- and nine months Ended March 31, 2006 and 2005
(unaudited)
Quarter ended
March 31,
------------------------ Increase
2006 2005 (Decrease)
Operating Revenues $5,422,987 $1,461,885 $3,961,102
Sales
- Oil (MBbls) 57 24 33
- Gas (MMcf) 229 41 188
- Total (MBOE) 96 31 65
Average Price
- Oil ($ / Bbl) $61.95 $49.39 $12.56
- Gas ($ / Mcf) $8.08 $5.60 $2.48
Nine months ended
March 31,
------------------------ Increase
2006 2005 (Decrease)
Operating Revenues $10,532,227 $3,780,437 $6,751,790
Sales
- Oil (MBbls) 120 62 58
- Gas (MMcf) 394 133 261
- Total (MBOE) 186 84 103
Average Price
- Oil ($ / Bbl) $60.69 $47.78 $12.91
- Gas ($ / Mcf) $8.14 $5.94 $2.20
See 10-QSB and accompanying notes to these unaudited financials
CANO PETROLEUM CORPORATION
Consolidated Balance Sheet - March 31, 2006
(unaudited)
ASSETS
------
Current assets
Cash and cash equivalents $1,319,253
Accounts receivable 2,154,435
Derivative assets 980,589
Other current assets 579,156
-------------
Total current assets 5,033,433
-------------
Oil and gas properties, successful efforts method 107,849,380
Less accumulated depletion and depreciation (1,361,955)
-------------
Net oil and gas properties 106,487,425
-------------
Fixed assets and other, net 4,610,888
Derivative assets 1,426,684
Goodwill 785,796
-------------
TOTAL ASSETS $118,344,226
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities
Accounts payable $877,089
Oil and gas payable 304,482
Accrued liabilities 274,090
Taxes payable 73,265
Current portion of asset retirement obligations 19,442
-------------
Total current liabilities 1,548,368
-------------
Long-term liabilities
Long-term debt 42,750,000
Asset retirement obligations 1,566,261
Deferred tax liability 32,998,000
-------------
Total liabilities 78,862,629
-------------
Commitments and contingencies (Note 12)
Stockholders' equity
Common stock, par value $.0001 per share; 50,000,000
authorized; 26,847,941 issued and 26,832,158
outstanding; including 2,659,975 shares held in
escrow 2,685
Additional paid-in capital 52,665,502
Accumulated deficit (13,081,516)
Treasury stock, at cost; 15,783 shares held in
escrow (7,102)
Deferred compensation (97,972)
-------------
Total stockholders' equity 39,481,597
-------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $118,344,226
=============
See 10-QSB and accompanying notes to these unaudited financials
CANO PETROLEUM CORPORATION
Consolidated Statements of Operations
Three- and nine months Ended March 31, 2006 and 2005
(unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------ -------------------------
2006 2005 2006 2005
------------ ----------- ------------ ------------
Operating Revenues:
Crude oil and
natural gas sales $5,422,987 $1,461,885 $10,532,227 $3,780,437
Operating Expenses:
Lease operating
expenses 2,065,739 819,093 4,059,837 1,815,837
Production taxes 379,990 92,710 701,482 241,809
General and
administrative 1,800,564 729,989 4,690,232 2,121,967
Deferred
compensation expense 146,961 431,439 443,547 1,341,285
Accretion of asset
retirement
obligations 30,282 5,584 75,656 16,444
Depletion and
depreciation 631,340 159,823 1,058,198 403,538
------------ ----------- ------------ ------------
Total operating
expenses 5,054,876 2,238,638 11,028,952 5,940,880
------------ ----------- ------------ ------------
Income (Loss) from
operations 368,111 (776,753) (496,725) (2,160,443)
Other income
(expenses):
Unrealized loss on
hedge contracts (1,274,900) - (2,910,437) -
Interest expense (928,645) (370) (1,260,690) (752)
Interest income and
deductions, net 27,406 1,841 122,331 11,288
------------ ----------- ------------ ------------
Total other
income
(expenses) (2,176,139) 1,471 (4,048,796) 10,536
------------ ----------- ------------ ------------
Loss before income
tax benefit (1,808,028) (775,282) (4,545,521) (2,149,907)
Deferred income tax
benefit 677,000 - 1,470,000 -
------------ ----------- ------------ ------------
Net loss (1,131,028) (775,282) (3,075,521) (2,149,907)
Preferred stock
discount - - - 416,534
------------ ----------- ------------ ------------
Loss applicable to
common stock $(1,131,028) $(775,282) $(3,075,521) $(2,566,441)
============ =========== ============ ============
Net loss per share -
basic and diluted $(0.05) $(0.07) $(0.14) $(0.24)
============ =========== ============ ============
Weighted average
common shares
outstanding
Basic and diluted 24,187,966 11,204,155 21,740,759 10,722,854
============ =========== ============ ============
See 10-SBQ and accompanying notes to these unaudited financials
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 forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " within the meaning of Section 27A of the Securities Act of 1933, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. , 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 ge·ol·o·gy n. pl. ge·ol·o·gies 1. The scientific study of the origin, history, and structure of the earth. 2. The structure of a specific region of the earth's crust. 3. A book on geology. 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 indicative: see mood. 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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