Cross Border Resources, Inc. (XBOR)

[SeaOhToo]

Cross Border Resources, Inc. Announces 2011 Third Quarter Results

2011-11-14 16:30 ET - News Release

SAN ANTONIO, Nov. 14, 2011 /PRNewswire/ -- Cross Border Resources, Inc. (OTCQX: XBOR), ("Cross Border" or "the Company") today announced its financial results for the third quarter ended September 30, 2011, which is the third full quarter of operations for the Company. Cross Border is an oil and gas exploration and production company resulting from the business combination of Doral Energy Corp. and Pure Energy Group, which was effective January 3, 2011. The merger impacts all comparisons to the prior year. Summary financial data is provided below:

Third Quarter 2011 Financial and Operating Highlights

* Revenues increased by 38% year-over-year to $1.9 million, up from $1.4 million in the third quarter of 2010.
* Production volume totaled 29,409 barrels of oil equivalent ("boe"), an increase of 38% compared to the third quarter of 2010.
* Average daily production sold during the third quarter of 2011 was 320 barrels of oil equivalent per day ("boed") compared to 232 boed for the third quarter of 2010.


Nine-Month Financial and Operating Highlights

* Revenues increased by 68% year-over-year to $5.6 million, up from $3.3 million in the nine months ended September 30, 2010.
* Production volume totaled 74,112 boe, an increase of 25% compared to the first nine months of 2010.
* Average daily production for the nine months ended September 30, 2011 was 272 boed compared to 217 boed for the first nine months of 2010.


(Logo: http://photos.prnewswire.com/prnh/20110523/AQ07208LOGO)

"We are pleased with our third-quarter performance," stated Everett "Will" Gray II, CEO and Chairman of Cross Border. "Revenues grew nearly 40% year-over-year, and average daily production exceeded our expectations. We expect improved bottom-line results in the near-term as our startup and merger-related costs decrease and our business growth accelerates."

Mr. Gray continued, "For the remainder of the year, we will concentrate on executing our fourth-quarter drilling schedule with a primary focus on the emerging Bone Spring and Wolfberry plays. We expect to participate in nine gross wells in the current quarter and remain on track to achieve a year-end exit rate of approximately 500 boed. Our non-operated business model and expansive acreage portfolio provide low-risk, high-impact exposure to the prolific Permian Basin, strongly positioning us to drive long-term value for our shareholders."

Results of Operations for the Three Months Ended September 30, 2011

Revenues

Revenues for the three months ended September 30, 2011 were $1.9 million, as compared to $1.4 million for the three months ended September 30, 2010. The increase of $0.5 million, or 38%, was primarily due to increased production from wells added year-over-year, increased production due to the merger, and a year-over-year increase in the average sales prices for oil and natural gas.

Production volumes for the three months ended September 30, 2011 were 29,409 boe, up 25% year-over-year and 30% sequentially. The increase was primarily due to a combination of increased production from wells added period-over-period and increased production brought on through the merger. Average daily production sold during the third quarter of 2011 was 320 boed compared to 232 boed for the third quarter of 2010. Cross Border's definition of daily production represents only what volumes were sold in each respective quarter and does not account for stored inventory.

Cross Border's average realized crude oil sales price for the third quarter of 2011 was $85.42 per barrel, compared to $72.36 in the third quarter of 2010. The Company's average realized natural gas sales price during the third quarter of 2011 was $6.34 per mcf, compared to $5.33 per mcf in the third quarter of 2010.

Income from Operations

Operating loss for the three months ended September 30, 2011 amounted to $610,973 as compared to operating income of $616,924 for the three months ended September 30, 2010. Operating expenses for the three-month period totaled $2.5 million, an increase of 232% as compared to $755,642 in the same period a year ago. The increase was primarily due to costs related to assets acquired in the merger and higher professional fees consistent with operating as a public company.

Net Income

Net loss for the three months ended September 30, 2011 was $249,555 as compared to net income of $533,801 for the three months ended September 30, 2010. Net loss per diluted share was $0.02 for the third quarter of 2011.

Adjusted EBITDA

Adjusted EBITDA totaled $709,671, or $0.04 per fully diluted share, a decrease of 24% compared to adjusted EBITDA of $937,045 in the year-ago period.

EBITDA is defined as net earnings before interest, income taxes, depreciation, depletion, amortization, abandonment and mark-to-market gains on derivatives (adjusted EBITDA), which is a non-GAAP performance measure. Adjusted EBITDA does not represent, and should not be considered an alternative to GAAP measurements, and Cross Border's calculations thereof may not be comparable to similarly titled measures reported by other companies. Cross Border's management does not view adjusted EBITDA in isolation and also uses other measurements, such as net earnings (loss) and revenues to measure operating performance. A complete reconciliation of EBITDA to GAAP accounting standards can be found in this press release under the financial table "Reconciliation to GAAP."

Results of Operations for the Nine Months Ended September 30, 2011

Revenues

Revenues for the nine months ended September 30, 2011 were $5.6 million as compared to $3.3 million for the nine months ended September 30, 2010. The increase of $2.3 million, or 68%, was primarily due to increased production from wells added year-over-year, increased production due to the merger, and a year-over-year increase in the average sales prices for oil and natural gas. Oil and gas sales increased 49% year-over-year to $4.9 million as compared to $3.3 million for the same period in 2010. The Company also recorded a $599,100 gain on the sale of oil and gas properties during the first nine months of 2011.

Production volume totaled 74,112 boe, an increase of 25% compared to 59,349 boe for the first nine months of 2010. The increase was due primarily to a combination of increased production from wells added period-over-period and increased production brought on through the merger. Average daily production for the nine months ended September 30, 2011 was 272 boed compared to 217 boed for the first nine months of 2010. Cross Border's definition of daily production represents only what volumes were sold in each respective quarter and does not account for stored inventory.

Cross Border's average realized crude oil sales price for the first nine months of 2011 was $86.44 per barrel, compared to $74.01 in the first nine months of 2010. The Company's average realized natural gas sales price during the first nine months of 2011 was $6.19 per mcf, compared to $5.77 per mcf for the first nine months of 2010.

Income from Operations

Operating loss for the nine months ended September 30, 2011 amounted to $799,856 as compared to operating income of $1.1 million for the nine months ended September 30, 2010. Operating expenses for the nine months ended September 30, 2011 totaled $6.4 million, up 185% from $2.2 million in the same period a year ago. The increase was primarily due to expanded production and included approximately $279,000 of non-recurring expenses associated with the merger.

Net Income

Net loss for the nine months ended September 30, 2011 was $471,068 as compared to net income of $755,244 for the nine months ended September 30, 2010. Net loss per diluted share was $0.03 for the first nine months of 2011.

Adjusted EBITDA

Adjusted EBITDA totaled $2.2 million, an increase of 6% compared to adjusted EBITDA of $2.0 million in the year-ago period.

Liquidity and Capital Resources

As of September 30, 2011, the Company's current assets were $2.7 million and current liabilities were $1.6 million. Cash and cash equivalents totaled $621,318 as of September 30, 2011. The Company's shareholders' equity at September 30, 2011 was $18.0 million. The Company used $1.3 million for operating activities for the nine months ended September 30, 2011, compared to a provision of $1.5 million for the same period in 2010. The Company used $1.6 million for investing activities for the nine months ended September 30, 2011, compared to $1.2 million for the same period in 2010. The Company generated $2.4 million from financing activities for the nine months ended September 30, 2011, compared to $612,895 used in financing activities for the same period in 2010.

2011 Business Outlook

Cross Border anticipates accelerated drilling activity in the second half of 2011 with a primary focus on its 2nd Bone Spring acreage located in both Eddy and Lea counties, New Mexico. Approximately 55% of Cross Border's 2011 CAPEX is allocated to the 2nd Bone Spring development. Cross Border is witnessing increased permitting activity within its current footprint due to the success of emerging drilling and completion technologies that have provided significant rates of return for Permian Basin operators, further demonstrated by the number of active rigs currently drilling in the Permian Basin.

The Company is participating in a workover attempt of the Three Rivers Bandit 15 Fed Com #2 well in Lea County, New Mexico with a 9.7% working interest. Three Rivers is plugging back the vertical well to test the Wolfcamp and Bone Spring intervals. Cost net to Cross Border's interest is approximately $124,000.

Cross Border expects to spud approximately 16 gross wells, or 1.9 approximate net wells, in 2011, with drilling capital expenditures of approximately $7.3 million for the year. Nine wells are scheduled to spud during the current quarter. Four wells initially scheduled for the fourth quarter of 2011 have been rescheduled to spud in early 2012: SE Lusk 33 #2H, Santa Elena 19 Fed #1H, Leo Fed Com #2H, and Brown Bear 14 St Com #1. Cross Border has decided to go non-consent on the Devon KSI 22 Fed #1H due to a significant cost estimate increase that also significantly reduced the well economics. The Alamo Delhi "B" St #3, a vertical well targeting the Grayburg and San Andres formations in Eddy County, New Mexico has been added to the schedule. Cross Border will participate with a 6.25% working interest and a drilling and completion cost of $40,000 proportionate to Cross Border's interest. All wells listed in the revised drilling schedule are classified as developmental wells.

Historically, Cross Border has been invoiced by its various operators over a three-month time frame with a net 30-day payment for each stage of the drilling and completion costs. If this remains the case, for the remainder of 2011, Cross Border would expect to fund approximately $2.6 million for its proportionate ownership costs with the remaining balance spilling over into Q1 of 2012. Cross Border expects to fund all remaining 2011 drilling commitments using cash-on-hand, cash flow and its existing credit facility. Current availability under the existing credit facility is approximately $3.2 million. The current well status and drilling schedule is provided in the chart below:

WELL NAME


COUNTY


OPERATOR


FORMATION


WORKING INTEREST


CURRENT STATUS


SE Lusk 33 #3H


Lea, NM


Cimarex


2nd Bone Spring


37.50%


Currently drilling


Ocelot 34 Fed Com #1H


Lea, NM


Mewbourne


2nd Bone Spring


14.90%


To be drilled in Q4


Zircon 2 #1H


Eddy, NM


Mewbourne


2nd Bone Spring


12.50%


To be drilled in Q4


Fecta 33 Fed Com #1H


Lea, NM


Occidental


2nd Bone Spring


12.50%


To be drilled in Q4


Mewbourne Bradley 30 St. Com #1H


Eddy, NM


Mewbourne


2nd Bone Spring


5.17%


Flowing back frac load


Tres Amigos PH


Borden, TX


Big Star


Wolfberry


10.00%


To be drilled in Q4


Coleman 1002


Dawson, TX


Big Star


Wolfberry


10.00%


Awaiting completion


Grave Digger #3H


Eddy, NM


Concho Resources


Yeso


5.64%


To be drilled in Q4


Alamo Delhi "B" St #3


Eddy, NM


Alamo


Grayburg and San Andres


6.25%


To be drilled in Q4


Bandit 15 Fed #2


Lea, NM


Three Rivers


Wolfcamp Shale/2nd Bone Spring 1st Bone Spring Workover


9.734%


Currently Completing


Buck Baker 15#1


Martin, TX


Big Star


Wolfberry


20%


Awaiting Completion


Hefley 24 #1


Howard, TX


Big Star


Wolfberry


20%


Awaiting Completion


High Lonesome 26 Fed #2H


Eddy, NM


Concho Resources


Horizontal Abo


3.125%


Flowing back frac load


Bradley 30 Fed #1H


Eddy, NM


Mewbourne


2nd Bone Spring


4.67%


Flowing back frac load




Conference Call and Webcast

Management will host a conference call to discuss these financial results Tuesday, November 15, at 11:00 a.m. Eastern time (8:00 a.m. Pacific).

To participate in the call please dial [phone], or [phone] for international calls, approximately 10 minutes prior to the scheduled start time. Interested parties can also listen via a live Internet webcast, which can be found via the Company's website at http://www.xbres.com, or alternately at http://ViaVid.net.

A replay of the call will be available for two weeks from 2:00 p.m. EST on November 15, 2011, until 11:59 p.m. EST on November 30, 2011. The number for the replay is [phone], or [phone] for international calls; the passcode for the replay is 4487385. In addition, a recording of the call will be available via the Company's website at http://www.xbres.com for one year.