Company News

Arete Industries, Inc. Reports Revenues of $481,360 for the Second Quarter Ended June 30, 2012

Download PDF

Results Represent $410,689 of Oil Sales and $70,671 From Natural Gas Sales

WESTMINSTER, Colo., Aug. 15, 2012 (GLOBE NEWSWIRE) -- Arete Industries, Inc. (OTCQB:ARET), announced revenue for the second quarter ended June 30, 2012 of $481,360 as the result of selling 5,525 barrels of oil and 20,457 Mcf of natural gas.

Highlights from Second Quarter 2012

  • Arete had cash and cash equivalents of approximately $168,241 as of June 30, 2012.
  • Arete sold 5,525 barrels of oil during the second quarter ended June 30th, 2012 and 20,457 Mcf of natural gas during the second quarter ended June 30th, 2012, representing 8,935 net barrels of oil equivalent (BOE).
  • Oil production was 6,089 barrels for the quarter adding 564 barrels to increase its oil held in tanks awaiting sale to 5,917 barrels.
  • Invested approximately $181,000 reworking existing wells which are expected to increase production in the second half of 2012.

The average oil price for the second quarter of 2012 of $74.33 per barrel decreased by 16.8% compared to $89.34 per barrel for the first quarter of 2012. During April and June 2012, the Company received "force majeure" notices about service interruptions and curtailments. As a result, natural gas production from the Company's Colorado properties was approximately 15% lower in the second quarter of 2012 compared to the first quarter of 2012. Furthermore, the average natural gas price, including proceeds from sales of natural gas liquids, amounted to $3.45 per Mcf for the second quarter of 2012, representing a decrease of 23.8% compared to $4.53 per Mcf for the first quarter of 2012.

The "force majeure" was related to the owner of the natural gas gathering system that the Company uses to transport production from its Colorado natural gas properties notifying us that it is undertaking a program to significantly expand its gathering and processing capacity. While the long-term impact of this program may be somewhat favorable, the near term impact will likely be service interruptions and curtailments that could have an adverse impact on the Company's future natural gas sales.

General and administrative expenses decreased by $396,156 in 2012 compared to 2011, primarily due to decreases in acquisition investigation and due diligence costs of $472,978 and unrelated party consulting fees of $28,551. Income from operations for the first six-months of 2012 was $12,441 compared to a loss of $1,259,910 for the first six-months of 2011.

Donald W. Prosser, CEO of Arete Industries stated: "The second quarter of 2012 was challenging due to a decrease in commodity pricing and some factors in our Colorado properties that were out of our control. Despite these economic and operational challenges, we were able to stay focused and post solid financial and production results, while significantly trimming our G&A expenses. Going forward, we expect to report strong revenue growth and gains from strategic sales as opportunities present themselves."

Make sure you are first to receive timely information on Arete when it hits the newswire. Sign up for Arete's email news alert system today at: https://ir.stockpr.com/areteindustries/email-alerts

About Arete Industries

The Company holds oil and gas properties in the Rocky Mountain Region of the United States and operates a small natural gas gathering system.  For additional information on Arete Industries visit the Company's new website at:  http://www.AreteIndustries.com/

SAFE HARBOR

This press release contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933 and the Securities Exchange Act of 1934. All statements other than statements of historical facts included in this report, such as statements regarding our future expectations to increase our production are forward-looking statements (often, but not always, using words such as "expects", "anticipates", "plans", "estimates", "potential", "possible", "probable", or "intends", or stating that certain actions, events or results "may", "will", "should", or "could" be taken, occur or be achieved). Forward-looking statements are based on our current expectations and assumptions about future events and involve inherent risks and uncertainties. These risks include, but are not limited to, the volatility in commodity prices for crude oil and natural gas, the presence or recoverability of estimated reserves, the ability to replace reserves, environmental risks, drilling and operating risks, exploration and development risks, competition and government regulation or other actions. Additional information on these and other factors which could affect Arete's operations or financial results are included in Arete's reports on file with the Securities and Exchange Commission. Such factors (many of which are beyond our control) could cause actual results to differ materially from those set forth in the forward-looking statements.. Readers should not place undue reliance on any such forward-looking statements, which are made only as of the date hereof. Arete undertakes no duty or obligation to update any forward-looking statements contained in this release as a result of new information, future events or changes in Arete's expectations.

 
ARETE INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
December 31, 2011 and June 30, 2012
     
ASSETS 2011 2012
     
Current Assets:    
Cash and equivalents  $ 219,566  $ 168,241
Receivable from DNR Oil & Gas, Inc.:    
Oil and gas sales, net of production costs  165,283  106,957
Other  15,597  38,444
Prepaid expenses and other  207,338  147,874
     
Total Current Assets  607,784  461,516
     
Property and Equipment:    
Oil and gas properties, at cost, successful efforts method:    
Proved properties  9,056,032  8,969,558
Unevaluated properties  287,728  310,288
Natural gas gathering system  442,195  442,195
Furniture and equipment  22,522  22,522
Total property and equipment  9,808,477  9,744,563
Less accumulated depreciation, depletion and amortization  (525,154)  (876,551)
     
Net Property and Equipment  9,283,323  8,868,012
     
TOTAL ASSETS  $ 9,891,107  $ 9,329,528
     
     
     
LIABILITIES AND STOCKHOLDERS' EQUITY     
     
Current Liabilities:    
Accounts payable:    
Payable to DNR Oil & Gas, Inc.:    
Oil and gas property acquisition costs  $ 826,791  $ 291,616
Gas gathering operating costs  416,835  436,403
Operator fees and other  151,748  151,748
Unrelated parties  92,019  96,912
Notes and advances payable:    
Directors and affiliates  109,319  245,950
Unrelated parties  250,000  250,000
Accrued interest expense  88,303  39,375
Director fees payable in common stock  90,000  30,000
Finders fee payable for private placement of preferred stock  105,000  105,000
Accrued consulting services payable in common stock  18,750  48,750
Current portion of asset retirement obligations  15,398  67,527
Other accrued costs and expenses  111,061  153,040
     
Total Current Liabilities   2,275,224  1,916,321
     
Asset Retirement Obligations, net of current portion  637,842  599,840
     
Total Liabilities  2,913,066  2,516,161
     
Commitments and Contingencies (Note 3, 5 and 9)    
     
Stockholders' Equity:    
Convertible Class A preferred stock; $10,000 face value per share, authorized 1,000,000 shares:    
Series 1; authorized 30,000 shares, issued and outstanding 522.5 shares in 2011 and 2012, liquidation preference of $5,421,000 in 2011 and 2012  5,023,371  5,023,371
Series 2; authorized 2,500 shares, issued and outstanding no shares in 2011 and 2012  --  --
Common stock, no par value; authorized 499,000,000 shares, issued and outstanding 7,764,476 in 2011 and 7,979,803 in 2012  16,904,154  17,151,096
Accumulated deficit  (14,949,484)  (15,361,100)
     
Total Stockholders' Equity   6,978,041  6,813,367
     
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 9,891,107  $ 9,329,528
     
 
 
ARETE INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Quarter and the Six-Months Ended June 30, 2011 and 2012
         
  Quarter Ended June 30: Six-Months Ended June 30:
  2011 2012 2011 2012
         
Revenues:        
Oil and natural gas sales  $ --  $ 481,360  $ --  $ 1,035,395
Sale of oil and natural gas properties  --  --  --  533,048
Gas gathering income  15,983  --  45,639  --
         
Total revenues  15,983  481,360  45,639  1,568,443
         
Operating Expenses:        
Oil and gas producing activities:        
Lease operating expenses  --  117,944  --  401,653
Production taxes  --  40,130  --  84,326
Depreciation, depletion, amortization and accretion  --  205,730  --  336,837
Gas gathering:        
Cost of operations:        
Related Party   10,204  --  30,815  --
Unrelated parties  33,415  3,660  80,558  7,320
Depreciation  11,055  11,055  22,110  22,110
General and administrative expenses:        
Director fees  30,000  30,000  60,000  60,000
Investor relations  84,782  84,227  225,322  130,031
Acquisition investigation and due diligence  472,978  --  500,478  --
Legal, auditing and professional services  42,430  28,562  85,969  77,642
Consulting and executive services:        
Related parties  56,375  155,750  112,750  316,500
Unrelated parties  83,610  55,059  161,852  76,504
Other administrative expenses  8,970  29,249  25,695  42,795
Depreciation  --  142  --  285
         
Total operating expenses  833,819  761,508  1,305,549  1,556,003
         
Operating income (loss)  (817,836)  (280,148)  (1,259,910)  12,441
         
Other income (expense):        
Interest income  139  65  279  220
Interest expense  (22,697)  (14,556)  (34,442)  (32,401)
         
Loss before income taxes  (840,394)  (294,639)  (1,294,073)  (19,741)
Income tax benefit (expense)  --  --  --  --
         
Net loss  $ (840,394)  $ (294,639)  $ (1,294,073)  $ (19,741)
         
Net Loss Applicable to Common Stockholders:        
Net loss  $ (840,394)  $ (294,639)  $ (1,294,073)  $ (19,741)
Accrued preferred stock dividends  --  (195,938)  --  (391,875)
         
 Net loss applicable to common stockholders   $ (840,394)  $ (490,577)  $ (1,294,073)  $ (411,616)
         
Earnings (Loss) Per Share Applicable to Common         
Stockholders:        
Basic  $ (0.12)  $ (0.06)  $ (0.22)  $ (0.05)
         
Diluted  $ (0.12)  $ (0.06)  $ (0.22)  $ (0.05)
         
Weighted Average Number of Common Shares         
Outstanding:        
Basic  6,985,000  7,788,000  5,995,000  7,776,000
         
Diluted  6,985,000  7,788,000  5,995,000  7,776,000
         
 
 
ARETE INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six-Months Ended June 30, 2011 and 2012
     
  2011 2012
     
Cash Flows from Operating Activities:    
Net loss   $ (1,294,073)  $ (19,741)
Adjustments to reconcile net loss to net cash provided by    
(used in) operating activities:    
Depreciation, depletion and amortization  22,110  355,132
Accretion of discount on asset retirement obligations  --  4,100
Gain on sale of oil and gas properties  --  (533,048)
Common stock issued in exchange for services  734,084  246,942
Common stock issued in exchange for accrued interest  --  10,462
Changes in operating assets and liabilities:    
 Accounts receivable  11,832  (76,179)
 Prepaid expenses and other  --  60,712
 Accounts payable  (5,721)  24,461
 Accrued costs and expenses  72,991  2,590
     
Net cash provided by (used in) operating activities  (458,777)  75,431
     
Cash Flows from Investing Activities:    
Capital expenditures for oil and gas properties  (500,000)  (646,269)
Proceeds from sale of oil and gas properties  --  1,108,709
Contingent consideration paid to DNR under sharing arrangement  --  (282,704)
     
Net cash provided by (used in) investing activities  (500,000)  179,736
     
Cash Flows from Financing Activities:    
Proceeds from notes and advance payable  870,000  400,000
Principal payments on notes payable  (9,256)  (264,619)
Payment of dividends on preferred stock  --  (391,875)
Proceeds from sale of common stock  103,500  --
Payment of preferred stock offering costs  --  (50,000)
     
Net cash provided by (used in) financing activities  964,244  (306,494)
     
Net increase in cash and equivalents  5,467  (51,327)
Cash and equivalents, beginning of period  15,990  219,566
     
Cash and equivalents, end of period  $ 21,457  $ 168,239
     
Supplemental Disclosure of Cash Flow Information:    
Cash paid for interest  $ 17,755  $ 83,827
Cash paid for income taxes  $ --  $ --
     
Supplemental Disclosure of Non-cash Investing and Financing Activities:    
Conversion of notes payable to 897,500 shares of common stock  $ 1,335,000  $ --
     
Note payable to DNR for acquisition of oil and gas properties  $ 9,500,000  $ --
     
Payable to DNR for acquisition of oil and gas properties  $ --  $ 41,616
     
Asset retirement obligations assumed upon sale of oil and gas properties  $ --  $ 16,411
     
Increase in oil and gas properties due to revision of asset retirement obligations  $ --  $ 26,437
     
Contact:
 
Arete Industries, Inc. Investor Relations:
Gerald Kieft
WSR Communications
772-219-7525
IR@WSRcommunications.com
http://wsrcommunications.ir.stockpr.com/areteindustries/overview
Source: Arete Industries, Inc.