UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2007
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 000-50682
RAM Energy Resources, Inc.
(Exact name of registrant as specified in its charter)
Delaware
1311
20-0700684
(State or other jurisdiction of incorporation or organization)
(Primary Standard Industrial Classification Code Number)
(I.R.S. Employer Identification Number)
5100 East Skelly Drive, Suite 650, Tulsa, OK 74135
(Address of principal executive offices)
(918) 663-2800
(Registrant’s telephone number, including area code)
i
(Former name, former address and former fiscal year, if changed since last report)
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 twelve 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 o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer o
Accelerated Filer o
Non-Accelerated Filer x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
At August 6, 2007, 41,232,861 shares of the Registrant’s Common Stock were outstanding.
Second Quarter 2007 Form 10-Q Report
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
3
ITEM 1.
FINANCIAL STATEMENTS (unaudited)
Condensed Consolidated Balance Sheets – June 30, 2007 and December 31, 2006
4
Condensed Consolidated Statements of Operations – Three and Six Months Ended June 30, 2007 and 2006
5
Condensed Consolidated Statements of Cash Flows –Six Months Ended June 30, 2007 and 2006
6
Notes to Condensed Consolidated Financial Statements
7
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
17
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
25
ITEM 4.
CONTROLS AND PROCEDURES
26
PART II - OTHER INFORMATION
27
LEGAL PROCEEDINGS
ITEM 1A.
RISK FACTORS
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
DEFAULTS UPON SENIOR SECURITIES
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5.
OTHER INFORMATION
ITEM 6.
EXHIBITS
28
SIGNATURES
31
2
PART I – FINANCIAL INFORMATION
Completion of Merger
On May 8, 2006, we acquired RAM Energy, Inc. through the merger of our subsidiary into RAM Energy. Upon completion of the merger, RAM Energy became our wholly owned subsidiary.
Upon consummation of the merger, the stockholders of RAM Energy received an aggregate of 25,600,000 shares of our common stock and $30.0 million of cash. Prior to consummation of the merger, RAM Energy redeemed a portion of its outstanding stock for an aggregate consideration of $10.0 million.
The merger was accounted for as a reverse acquisition. RAM Energy has been treated as the acquiring company and continuing reporting entity for accounting purposes. Upon completion of the merger, our assets and liabilities were recorded at historical cost, and added to those of RAM Energy. Because we had no active business operations prior to consummation of the merger, the merger has been accounted for as a recapitalization of RAM Energy.
Restatement of Prior Period Financial Statements
On August 9, 2007, we amended our Annual Report on Form 10-K for the fiscal year ended December 31, 2006, as filed with the Securities and Exchange Commission on April 2, 2007, and our Form 10-Q for the first quarter of 2007, as filed with the Securities and Exchange Commission on May 14, 2007. The Form 10-K/A and Form 10-Q/A were filed to restate our prior period financial statements to:
•
Clarify the accounting treatment of the reverse merger recapitalization of RAM Energy, Inc.; and
Revise our Statements of Stockholders’ Deficit and to make corresponding changes to the related reported earnings per share.
ITEM 1 – FINANCIAL STATEMENTS
Condensed consolidated balance sheets
(in thousands, except share and per share amounts)
June 30,
December 31,
2007
2006
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$ 28,519
$ 6,721
Accounts receivable:
Oil and natural gas sales
6,756
6,194
Joint interest operations, net of allowance of $189
($187 at December 31, 2006)
240
750
Income taxes
20
121
Other, net of allowance of $29 ($33 at December 31, 2006)
184
236
Derivative assets
-
677
Prepaid expenses
691
1,013
Other current assets
156
Total current assets
36,566
15,712
PROPERTIES AND EQUIPMENT, AT COST:
Oil and natural gas properties and equipment, using full cost
213,749
185,284
Other property and equipment
6,207
6,098
219,956
191,382
Less accumulated amortization and depreciation
(56,214)
(48,577)
Total properties and equipment
163,742
142,805
OTHER ASSETS:
Deferred loan costs, net of accumulated amortization of $5,232
($4,840 at December 31, 2006)
2,201
2,593
Other
764
615
Total assets
$ 203,273
$ 161,725
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable:
Trade
$ 6,283
$ 7,810
Oil and natural gas proceeds due others
3,022
3,886
Related party
44
14
109
Accrued liabilities:
Compensation
746
1,611
Interest
5,489
3,849
369
223
Derivative liabilities
133
Long-term debt due within one year
28,665
756
Total current liabilities
44,860
18,180
OIL & NATURAL GAS PROCEEDS DUE OTHERS
2,558
2,481
DERIVATIVE LIABILITIES
545
LONG-TERM DEBT
119,103
131,481
DEFERRED AND OTHER NON-CURRENT INCOME TAXES
26,612
26,677
ASSET RETIREMENT OBLIGATION
10,933
10,801
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
Common stock, $0.0001 par value, 100,000,000 shares authorized; 42,050,136 and 34,276,805 shares issued; 41,212,861 shares and 33,439,530 shares outstanding at June 30, 2007 and December 31, 2006, respectively
Additional paid-in capital
30,067
2,308
Treasury stock - 837,275 shares at cost
(3,768)
Accumulated deficit
(27,641)
(26,438)
Stockholders' deficit
(1,338)
(27,895)
Total liabilities and stockholders' deficit
The accompanying notes are an integral part of these condensed consolidated financial statements.
Condensed consolidated statements of operations
Three months ended
Six months ended
(Restated)
REVENUES AND OTHER OPERATING INCOME:
$ 17,883
$ 17,973
$ 33,027
$ 34,783
Realized and unrealized losses on derivatives
(207)
(4,178)
(1,291)
(2,770)
99
180
302
424
Total revenues and other operating income
17,775
13,975
32,038
32,437
OPERATING EXPENSES:
Oil and natural gas production taxes
1,026
874
1,850
1,684
Oil and natural gas production expenses
4,683
4,607
9,210
8,913
Amortization and depreciation
4,129
3,311
7,554
6,524
Accretion expense
144
132
290
265
Share-based compensation
221
2,218
394
General and administrative, overhead and other
expenses, net of operators’ overhead fees
2,578
2,088
4,924
4,047
Total operating expenses
12,781
13,230
24,222
23,651
Operating income
4,994
745
7,816
8,786
OTHER INCOME (EXPENSE):
Interest expense
(3,990)
(5,778)
(7,828)
(9,307)
Interest income
313
82
520
INCOME (LOSS) BEFORE INCOME TAXES
1,317
(4,951)
508
(412)
INCOME TAX PROVISION (BENEFIT)
415
(1,882)
186
(157)
NET INCOME (LOSS)
$ 902
$ (3,069)
$ 322
$ (255)
EARNINGS (LOSS) PER SHARE:
Basic
$ 0.02
$ (0.10)
$ 0.01
$ (0.01)
Diluted
WEIGHTED AVERAGE SHARES OUTSTANDING:
40,292,725
30,389,287
38,759,576
28,451,552
40,384,374
38,850,432
Condensed consolidated statements of cash flows
(in thousands)
OPERATING ACTIVITIES:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization and depreciation-
Oil and natural gas properties and equipment
7,250
6,176
Amortization of deferred loan costs and Senior notes discount
413
562
Charge off of unamortized deferred loan costs
1,055
304
348
Unrealized (gain) loss on derivatives
1,156
(844)
Deferred income taxes
(66)
Gain on disposal of other property and equipment
(99)
Changes in operating assets and liabilities -
Accounts receivable
101
1,093
Prepaid expenses and other current assets
166
567
Accounts payable
(2,283)
616
Income taxes payable
146
(109)
Accrued liabilities and other
(697)
3,930
Total adjustments
7,174
15,621
Net cash provided by operating activities
7,496
15,366
INVESTING ACTIVITIES:
Payments for oil and natural gas properties and equipment
(28,515)
(10,493)
Proceeds from sales of oil and natural gas properties and equipment
50
3,502
Payments for other property and equipment
(566)
Proceeds from sales and disposals of other property and equipment
366
Net cash used in investing activities
(28,574)
(7,191)
FINANCING ACTIVITIES:
Payments on long-term debt
(546)
(87,508)
Payments of loan fees
(2,977)
Proceeds from borrowings on long-term debt
16,056
106,454
Common stock offering, net of direct costs
27,366
Stock redemption
(9,792)
Repurchase of stock
(593)
Payments of merger costs
(4,187)
Cash acquired in merger
3,801
Dividends paid
(500)
Net cash provided by financing activities
42,876
4,698
INCREASE IN CASH AND CASH EQUIVALENTS
21,798
12,873
CASH AND CASH EQUIVALENTS, beginning of period
6,721
70
CASH AND CASH EQUIVALENTS, end of period
$28,519
$12,943
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest
$ 7,300
$ 2,618
Cash paid for income taxes
$ 5
$ 109
DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
Accrued interest added to principal balance of revolving Credit Facility
$ -
$ 2,797
Notes to unaudited condensed consolidated financial statements
A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ORGANIZATION AND BASIS OF
PRESENTATION
1.
Basis of Financial Statements
The accompanying unaudited condensed consolidated financial statements present the financial position at June 30, 2007 and December 31, 2006 and the results of operations and cash flows for the three and six month periods ended June 30, 2007 and 2006 of RAM Energy Resources, Inc. and its subsidiaries (the “Company”). These condensed consolidated financial statements include all adjustments, consisting of normal and recurring adjustments, which, in the opinion of management, are 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 and six month periods ended June 30, 2007 are not necessarily indicative of the results to be expected for the full year ending December 31, 2007. Reference is made to the Company’s consolidated financial statements for the year ended December 31, 2006, for an expanded discussion of the Company’s financial disclosures and accounting policies.
2.
Nature of Operations and Organization
On May 8, 2006, Tremisis Energy Acquisition Corporation, or Tremisis, acquired RAM Energy, Inc., or RAM Energy, through the merger of a subsidiary of Tremisis into RAM Energy. The merger was accomplished pursuant to the terms of an Agreement and Plan of Merger dated October 20, 2005, as amended, among Tremisis, its subsidiary, RAM Energy and the stockholders of RAM Energy. Upon completion of the merger, RAM Energy became a wholly-owned subsidiary of Tremisis and Tremisis changed its name to RAM Energy Resources, Inc.
Tremisis was formed in February 2004 to effect a merger, capital stock exchange, asset acquisition or other similar business combination with an unidentified operating business in either the energy or the environmental industry. Prior to the consummation of the merger, Tremisis did not engage in an active trade or business. Prior to the merger, RAM Energy was a privately held, independent oil and natural gas company engaged in the acquisition, exploration, exploitation and development of oil and natural gas properties and the production of oil and natural gas.
Upon consummation of the merger, the stockholders of RAM Energy received an aggregate of 25,600,000 shares of Tremisis common stock and $30.0 million of cash. The merger agreement provided, among other things, that, prior to the consummation of the merger, RAM Energy was entitled to either pay its stockholders a one-time extraordinary dividend or effect one or more redemptions of a portion of its outstanding stock, although the aggregate amount of such cash payments to the RAM Energy stockholders could not exceed the difference between $40.0 million and the aggregate amount of cash they would receive from Tremisis in the merger. On April 6, 2006, RAM Energy redeemed a portion of its outstanding stock for an aggregate consideration of $10.0 million.
The merger was accounted for as a reverse acquisition. Because Tremisis had no active business operations prior to consummation of the merger, the merger has been accounted for as a recapitalization of RAM Energy and RAM Energy has been treated as the acquirer and continuing reporting entity for accounting purposes. The assets and liabilities of Tremisis have been stated at historical cost and added to those of RAM Energy.
The Company operates exclusively in the upstream segment of the oil and gas industry with activities including the drilling, completion, and operation of oil and gas wells. The Company conducts the majority of its operations in the states of Texas, Louisiana, Oklahoma and New Mexico.
3.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates and assumptions that, in the opinion of management of the Company are significant include oil and natural gas reserves, amortization relating to oil and natural gas properties, asset retirement obligations and income taxes.
8
4.
Earnings (Loss) Per Share
SFAS No. 128, Earnings per Share, requires a dual presentation of basic and diluted earnings per share (“EPS”). Basic EPS excludes dilution and is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock (e.g. common stock options, grants and warrants) were exercised into common stock. Potential common shares in the diluted EPS computation are excluded for the three and six-month period ended June 30, 2006, as their effect would be anti-dilutive. A reconciliation of earnings or loss and weighted average shares used in computing basic and diluted EPS is as follows for the three and six months ended June 30 (in thousands, except share and per share amounts):
Three Months Ended
Six Months Ended
Weighted average shares - basic
Dilutive effect of unvested stock grants
91,649
90,856
Weighted average shares - diluted
Basic earnings (loss) per share
Diluted earnings (loss) per share
5.
Recently Issued Accounting Pronouncements
Effective January 1, 2007, the Company adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”). The Interpretation prescribes guidance for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. To recognize a tax position, the enterprise determines whether it is more likely than not that the tax position will be sustained upon examination, including resolution of any related appeals or litigation, based solely on the technical merits of the position. A tax position that meets the more likely than not threshold is measured to determine the amount of benefit to be recognized in the financial statements. The amount of tax benefit recognized with respect to any tax position is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement.
The cumulative effect of applying FIN 48 must be reported as an adjustment to the opening balance of retained earnings in the year of adoption. The net impact of the cumulative effect of adopting FIN 48 was a $1.3 million decrease to retained earnings, with a corresponding increase to accrued interest related to uncertain tax positions.
The Company had unrecognized tax benefits of approximately $9.6 million as of January 1, 2007. These unrecognized tax benefits, if recognized, would be recorded as a reduction of income tax expense. There have been no material changes to these amounts during the six months ended June 30, 2007.
The Company recognizes related interest and penalties as a component of income tax expense. Approximately $1.5 million of interest was accrued at January 1, 2007 related to uncertain tax positions.
The Company expects that these unrecognized tax benefits will decrease by $3.7 million over the next twelve months, due to the expiration of the statute of limitations on certain open tax years. Tax years open for audit by federal and state tax authorities as of the date of adoption are the years ended December 31, 2003, 2004, and 2005. Tax years ending prior to 2003 are open for audit to the extent that net operating losses generated in those years are being carried forward or utilized in an open year. The Company is not currently under audit by any federal or state taxing authorities.
9
In September 2006, the Financial Accounting Standards Board issued SFAS No. 157 “Fair Value Measurements” (“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning on or after November 15, 2007. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements, however, it does not require any new fair value measurements. In some instances, the application of SFAS No. 157 will change current accounting practices. The Company is currently evaluating the impact of adopting SFAS No. 157.
B - DERIVATIVE CONTRACTS
During 2007 and 2006, the Company entered into numerous derivative contracts. The Company did not formally designate these transactions as hedges as required by SFAS No. 133 in order to receive hedge accounting treatment. Accordingly, all gains and losses on the derivative financial instruments have been recorded in the statements of operations.
The Company’s derivative positions at June 30, 2007 are shown in the following table:
Crude Oil (Bbls)
Natural Gas (Mmbtu)
Floors
Ceilings
per day
Price
Collars
1,500
$ 52.67
$ 72.58
4,000
$ 7.70
$ 12.67
2008
$ 56.01
$ 83.39
$ 6.87
$ 13.53
2009
765
$ 56.55
$ 75.35
$ 7.00
$ 10.98
Secondary Floors
Year
$ 12.00
800
$ 75.00
Crude oil floors and ceilings for 2007 cover July through December. Natural gas floors and ceilings for 2007 cover August through December. Natural gas secondary floors for 2007 are for August through October. Floors and ceilings for both crude oil and natural gas cover the calendar year 2008. Crude oil floors and ceilings and natural gas floors and ceilings for 2009 cover January through September. Crude oil secondary floors for 2009 cover January through March.
The Company measured the fair value of its derivatives at June 30, 2007 and December 31, 2006 based on quoted market prices. Accordingly, a current liability of $133,000 and a long-term liability of $545,000 were recorded in the consolidated balance sheet at June 30, 2007 and a current asset of $677,000 was recorded in the consolidated balance sheet at December 31, 2006.
C - LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
June 30, 2007
December 31, 2006
11.5% Senior Notes due 2008, net of discount
$ 28,372
$ 28,351
Credit Facility
119,000
103,000
Installment loan agreements
396
886
147,768
132,237
Less amount due within one year
10
$ 119,103
$ 131,481
Senior Notes
In February 1998 the Company completed the sale of $115.0 million of 11.5% Senior Notes due 2008 in a public offering of which $28.4 million remained outstanding at December 31, 2006 and 2005. The Senior Notes are senior unsecured obligations of the Company and are redeemable at the option of the Company in whole or in part, at any time on or after February 15, 2005, at prices ranging from 111.5% to 103.8% of face amount to their scheduled maturity in February 2008.
The indenture under which the Senior Notes were issued contained certain covenants, including covenants that limited (i) incurrence of additional indebtedness and issuances of disqualified capital stock, (ii) restricted payments, (iii) dividends and other payments affecting subsidiaries, (iv) transactions 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.
In November 2002 the Company recognized a gain (net of unamortized deferred offering and original issue discount costs and transaction fees) of $32.9 million as a result of the purchase of $63.475 million face amount of the Senior Notes. The Senior Notes, plus accrued interest of $1.988 million, were purchased at 46% of face amount and were canceled by the Company. The Company utilized borrowings under its revolving credit agreement and available cash to purchase the Senior Notes.
In connection with the Company’s November 2002 purchase of the Senior Notes, the indenture was amended to eliminate the covenant limitations described above.
At June 30, 2007 and December 31, 2006, respectively, the unamortized original issue discount associated with the Notes totaled approximately $24,000 and $45,000, respectively.
Revolving Credit Facility
On April 5, 2006, RAM Energy obtained a $300.0 million senior secured credit facility, consisting of a $150.0 million, five-year term loan facility and a $150.0 million four-year revolving credit facility. RAM Energy Resources, Inc. is not a party to or a guarantor of obligations under this credit facility.
At closing, $50.0 million of the revolving credit facility was immediately available, and $90.0 million of the term loan was advanced. The remainder of the term loan facility will be available, subject to approval of the lenders, for certain future needs, including acquisitions. The revolving credit facility will mature in April, 2010, during which time amounts may be borrowed and repaid as often as needed, subject to a borrowing base limitation that is re-determined semi-annually, based on oil and gas reserves. The term loan facility will mature in April, 2011, with permitted prepayments after the first year, subject to a prepayment premium in the second and third years of the term. Advances under the revolving credit facility will bear interest at LIBOR plus 2% per annum, while amounts outstanding under the term loan will bear interest at LIBOR plus 5.5% to 6.0% per annum. Obligations under the credit facility are secured by a first lien on substantially all of the assets of RAM Energy and its subsidiaries. The initial advance under the credit facility was used to refinance the previous credit facility, and to fund the pre-merger redemption payment permitted by the merger agreement. Subsequent advances may be used to:
repurchase all of RAM Energy’s outstanding 11.5% senior notes ($28.4 million principal amount); and
for general working capital purposes.
The credit facility contains financial covenants requiring RAM Energy to maintain certain ratios, including a current ratio, a ratio of earnings before interest, taxes, depreciation and amortization, or EBITDA, to interest expense, a ratio of total indebtedness to EBITDA, and a ratio of asset value to total indebtedness. In addition, the credit facility contains other affirmative and negative covenants customary in lending transactions of this nature, including the maintenance by RAM Energy of hedging contracts for a minimum and maximum amount of projected oil and natural gas production from its properties. RAM Energy was in compliance with all of its covenants in the credit facility at June 30, 2007.
11
On August 8, 2007 the credit facility was amended by transferring $40.0 million of the outstanding term facility to the revolving credit facility. . The revolving facility borrowing base was increased to $100.0 million from $50.0 million. Interest rates were lowered from LIBOR plus 5.5% per annum on the term facility to LIBOR plus 5% per annum, and from LIBOR plus 2% per annum on the revolving facility to LIBOR plus a range of 1.25% to 2.0%, depending on usage. In addition, certain financial covenants were changed effective June 30, 2007.
D - SUBSIDIARY GUARANTORS
RAM Energy Resources, Inc. is not a party to, or a guarantor of obligations under, RAM Energy’s outstanding 11.5% senior notes due 2008. RAM Energy’s senior notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis, by all current and future subsidiaries of RAM Energy which are referred to as the “Subsidiary Guarantors”. The following table sets forth condensed consolidating financial information of the Subsidiary Guarantors. Currently there are no restrictions on the ability of the Subsidiary Guarantors to transfer funds to RAM Energy in the form of cash dividends, loans or advances.
The following represents the condensed consolidating balance sheets for RAM Energy Resources, Inc. (“Parent”), RAM Energy Inc. and its subsidiaries at June 30, 2007 and December 31, 2006 (in thousands):
Parent
RAM Energy, Inc.
Subsidiary Guarantors
Consolidating Adjusments
Total Consolidated Amounts
Current assets
$ 26,114
$ (10,912)
$ 36,765
$ (15,401)
$ 36,566
Property and equipment, net
12
34,469
129,261
Investment in subsidiaries
(29,055)
47,115
(18,060)
Other assets
1
2,823
141
2,965
$ (2,928)
$ 73,495
$ 166,167
$ (33,461)
Current liabilities
$ 2,047
$ 51,790
$ 6,424
$ 44,860
Long-term debt
36,569
82,534
Other non-current liabilities
3,947
10,089
14,036
(3,637)
10,244
20,005
Total liabilities
(1,590)
102,550
119,052
(15,401)
204,611
Stockholders’ equity (deficit)
Total liabilities and stockholders’ equity (deficit)
$ 1,464
$ 3,044
$ 34,113
$ (22,909)
$ 15,712
13,780
129,021
(30,723)
42,684
(11,961)
3,069
138
3,208
$ (29,254)
$ 62,577
$ 163,272
$ (34,870)
$ 1,191
$ 30,379
$ 9,519
$ 18,180
48,945
82,536
3,339
9,943
13,282
(2,550)
10,637
18,590
(1,359)
93,300
120,588
(22,909)
189,620
The following represents the condensed consolidating statements of operations and statements of cash flows for RAM Energy Resources, Inc. (“Parent”), RAM Energy Inc. and its subsidiaries for the three months and six months ended June 30, 2007 and 2006 (in thousands):
Consolidating Adjustments
Three months ended June 30, 2007
Operating revenues
$ 17
$ 3,161
$ 14,597
$ 17,775
Operating expenses
1,510
2,428
8,843
Operating income (loss)
(1,493)
733
5,754
Other expense
1,844
810
(2,096)
(4,235)
(3,677)
Income (loss) before income taxes
351
1,543
3,658
(551)
72
894
$ 1,471
$ 2,764
$ (4,235)
Three months ended June 30, 2006
$ (2,192)
$ 16,167
$ 13,975
2,451
1,299
9,480
(2,451)
(3,491)
6,687
(1,544)
(614)
(2,230)
(1,308)
(5,696)
(3,995)
(4,105)
4,457
(926)
(2,545)
1,589
$ (1,560)
$ 2,868
$ (1,308)
13
Six months ended June 30, 2007
$ 4,109
$ 27,912
$ 32,038
2,632
3,832
17,758
(2,615)
277
10,154
2,102
890
(4,309)
(5,991)
(7,308)
(513)
1,167
5,845
(835)
(394)
1,415
$ 1,561
$ 4,430
$ (5,991)
Cash flows provided by (used in) operating activities
(5,104)
7,525
5,075
Cash flows (used in) provided by investing activities
(10)
(22,592)
(5,972)
Cash flows (used in) provided by financing activities
27,355
15,518
Increase (decrease) in cash and cash equivalents
22,241
451
(894)
Cash and cash equivalents, beginning of period
1,347
749
4,625
Cash and cash equivalents, end of period
$ 23,588
$ 1,200
$ 3,731
Six months ended June 30, 2006
$ 886
$ 31,551
$ 32,437
2,985
18,215
(2,099)
13,336
1,270
1,864
(4,345)
(7,987)
(9,198)
(1,181)
(235)
8,991
(1,489)
2,258
$ 1,254
$ 6,733
$ (7,987)
295
1,527
13,544
3,777
(10,968)
2,560
(392)
2,530
2,855
4,912
5,106
617
(547)
$ 2,855
$ 5,529
$ 4,559
$ 12,943
Due to intercompany allocations among the parent and its subsidiaries, the above condensed consolidating information is not intended to present the Company’s subsidiaries on a stand-alone basis.
E - COMMITMENTS AND CONTINGENCIES
In April 2002, a lawsuit was filed in the District Court for Woods County, Oklahoma against RAM Energy, certain of its subsidiaries and various other individuals and unrelated companies, by a lessor of certain oil and gas leases from which production was sold to a gathering system owned and operated by Magic Circle Energy Corporation (Magic Circle) or its wholly-owned subsidiary, Carmen Field Limited Partnership (CFLP). The lawsuit covers the period from 1977 to a current date. In 1998, both Magic Circle and CFLP became wholly-owned subsidiaries of RAM Energy. The lawsuit was filed as a class action on behalf of all royalty owners under leases owned by any of the defendants during the period Magic Circle or CFLP owned and operated the gathering system. The petition claims that additional royalties are due because Magic Circle and CFLP resold oil and gas purchased at the wellhead for an amount in excess of the price upon which royalty payments were based and paid no royalties on natural gas liquids extracted from the gas at plants downstream of the system. Other allegations include under-measurement of oil and gas at the wellhead by Magic Circle and CFLP, failure to pay royalties on take or pay settlement proceeds and failure to properly report deductions for post-production costs in accordance with Oklahoma’s check stub law.
RAM Energy and other defendants have filed answers in the lawsuit denying all material allegations set out in the petition. The Company believes that fair and proper accounting was made to the royalty owners for production from the subject leases and intends to vigorously defend the lawsuit. Plaintiffs have not specified an amount of claim, nor the time period covered. Management is unable to estimate a range of potential loss, if any, related to this lawsuit, and accordingly no amounts have been recorded in the consolidated financial statements. In the event the court should find RAM Energy and its related defendants liable for damages in the lawsuit, a former joint venture partner is contractually obligated to pay a portion of any damages assessed against the defendant lessees up to a maximum contribution of approximately $2.8 million. In addition, upon consummation of the merger, the former stockholders of RAM Energy deposited in escrow 3,200,000 shares of Company common stock received by such stockholders in the merger as a fund to indemnify the Company against any and all loss, cost, liability or expense incurred by the Company or any of its subsidiaries, including RAM Energy and its subsidiaries, arising out of matters specified in the merger agreement, including the lawsuit. These shares will remain in escrow until final disposition of the lawsuit.
The Company is also involved in legal proceedings and litigation in the ordinary course of business. In the opinion of management, the outcome of such matters will not have a material adverse effect on the Company’s financial position or results of operations.
F - CAPITAL STOCK
On May 8, 2006, the Company acquired RAM Energy by merger in exchange for an issuance of 25,600,000 shares of common stock and $30.0 million in cash. RAM Energy is now a wholly-owned subsidiary of the Company. As a result of the merger, RAM Energy was recapitalized so that the historical basis of its assets and liabilities remain intact. The only operations of the parent company included in the results of operations for 2006 are those that occurred subsequent to the date of the merger.
Also, on May 8, 2006, the shareholders of the Company approved the Company’s 2006 Long-Term Incentive Plan (the “Plan”), effective upon the consummation of the Company’s acquisition by merger of RAM Energy. The Company reserved a maximum of 2,400,000 shares of its common stock for issuance under the Plan. At the request of the grantees, the Company may repurchase shares to satisfy the grantees’ federal and state income tax withholding requirements, as permitted by the Plan. Any repurchased shares will be held by the Company as treasury stock. As of June 30, 2007, we had remaining a maximum of 1,149,864 shares of common stock reserved for issuance upon the exercise of options that may be granted and pursuant to awards that may be made under the Plan.
The Company granted Incentive Stock Awards under the Plan as set forth in the following table. Each of the grants (except the grants made on May 8, 2006) vests in equal increments over a five-year period from the date of grant.
15
The Incentive Stock Awards granted on May 8, 2006 vested in full on June 8, 2006. At the request of certain of the grantees, on June 8, 2006, the Company repurchased 98,100 of these shares at $6.04 per share, the closing market price of the Company’s common stock as of that date, to satisfy the grantees’ federal and state income tax withholding requirements, as permitted by the Plan. The repurchased shares are held by the Company as treasury stock at June 30, 2007.
Shares Granted
Shares Repurchased
Date
Number
Closing Price
May 8, 2006
330,000
$ 6.72
June 8, 2006
98,100
$ 6.04
November 10, 2006
646,805
$ 5.06
March 12, 2007
200,000
$ 4.18
March 19, 2007
14,000
$ 4.25
May 14, 2007
9,148
$ 4.61
June 12, 2007
38,000
$ 5.13
June 25, 2007
12,183
$ 5.47
On September 22, 2006, the Company purchased 739,175 shares of its common stock in a privately negotiated transaction. The purchase price was $4.295 per share, and the shares are included in treasury stock at June 30, 2007.
On February 13, 2007, the Company completed a public offering in which it issued 7,500,000 shares of its common stock, priced at $4.00 per share. Net proceeds of the offering were $27.4 million and have been and will be used to provide additional working capital for general corporate purposes, including acquisition, development, exploitation and exploration of oil and natural gas properties, and reduction of indebtedness.
G - DEFERRED COMPENSATION
On April 21, 2004 RAM Energy adopted a Deferred Bonus Compensation Plan (the “Deferred Bonus Plan”) for its senior management employees. The Deferred Bonus Plan was designed to provide additional compensation for significant business transactions with a portion of each bonus to be deferred to encourage retention of key employees. During 2005 three members of senior management were granted awards. Each award provides for a total cash compensation of $75,000 and vests on each anniversary date for three years beginning on July 1, 2005. Receipt of the award is contingent on the members being employed on the anniversary date. Should there be a change of control or involuntary termination, as defined in the award contract, each member will become fully vested in his award. Compensation expense is recorded on a straight-line basis. No awards were granted during 2006 or for the quarter ended June 30, 2007. The final vested award was paid during July 2007.
H - FINANCIAL CONDITION AND MANAGEMENT PLANS
The accompanying consolidated financial statements of the Company have been prepared on the basis of accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the condensed consolidated financial statements, for the three and six months ended June 30, 2007, the Company reported net income of approximately $902,000 as compared to a net loss of $3.1 million for the three months ended June 30, 2006 and net income of approximately $322,000 for the six months ended June 30, 2007, as compared to a net loss of $255,000 for the six months ended June 30, 2006. The condensed consolidated financial statements also show a total stockholder’s deficit of approximately $1.3 million and a working capital deficit of approximately $8.3 million at June 30, 2007. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.
Management believes that the combination of borrowings available to the Company under its revolving credit facility of $21.0 million at June 30, 2007, the remaining balance of unrestricted cash and cash flows from operations will be sufficient to satisfy its currently expected capital expenditures, working capital and debt service obligations for the foreseeable future. The actual amount and timing of future capital requirements may differ materially from estimates as a result of, among other things, changes in product pricing and regulatory, technological and competitive developments.
16
I - RELATED PARTY TRANSACTIONS
For the six months ended June 30, 2006, approximately $50,000 of expenses for the shareholders of RAM Energy are included in general and administrative expenses in the consolidated statements of operations, some of which may be personal in nature. These expenses were incurred by RAM Energy prior to its acquisition by the Company.
J – ACQUISITION
On May 15, 2007, the Company purchased certain oil and natural gas properties on which there are 120 wells in the Permian Basin area of Southeast New Mexico and West Texas. The Company acquired a 100 percent working interest in all of the acquired properties , and the aggregate purchase price of these properties was $18.7 million.
K - RESTATEMENT
The accompanying consolidated financial statements for the three and six months ended June 30, 2006 have been restated as described below.
Recalculation of weighted average shares outstanding and earnings per share.
The stockholders of RAM Energy, Inc. received 25,600,000 shares of Tremisis common stock and $30 million in cash upon consummation of a merger on May 8, 2006. We have accounted for the merger as a reverse acquisition, treated as a recapitalization of RAM Energy, Inc. However, our original statements of stockholders’ deficit reflect the historical shares held by the Tremisis shareholders, rather than the shares issued in the merger with RAM Energy, Inc., the accounting acquirer. Accounting for a reverse merger requires that the past share activity of the entity gaining control be recast using the exchange ratio to reflect the equivalent number of shares received in the acquisition, while also adjusting common stock and additional paid-in capital of any difference in par value of the stock. Accordingly, we have restated the shares outstanding and earnings per share as summarized in the table below:
June 30, 2006
Net Loss (in thousands)
AS ORIGINALLY REPORTED:
15,406,755
23,028,820
Dilutive effect of stock options
Dilutive effect of warrants
Basic earnings per share
$ (0.02)
$ (0.13)
Diluted earnings per share
AS RESTATED:
L – SUBSEQUENT EVENT
On August 8, 2007 the credit facility was amended by transferring $40.0 million of the outstanding term facility to the revolving credit facility. The revolving facility borrowing base was increased to $100.0 million from $50.0 million. Interest rates were lowered from LIBOR plus 5.5% per annum on the term facility to LIBOR plus 5% per annum, and from LIBOR plus 2% per annum on the revolving facility to LIBOR plus a range of 1.25% to 2.0%, depending on usage. In addition, certain financial covenants were changed effective June 30, 2007.
ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS
General
We are an independent oil and gas company engaged in the acquisition, development, exploitation, exploration and production of oil and natural gas properties, primarily in Texas, Louisiana, Oklahoma, and New Mexico. We have been active in these core areas since 1987. Our management team has extensive technical and operating expertise in all areas of our geographic focus. Since 1987, we have managed and developed oil and natural gas properties while seeking acquisition opportunities.
Principal Properties
We own properties located in Texas, Louisiana, Oklahoma, Mississippi, New Mexico, Wyoming and Arkansas, together with a small interest in an undeveloped acreage block located offshore California. However, our principal fields/areas are as follows:
Electra/Burkburnett Area, Wichita and Wilbarger Counties, Texas
Boonsville Area, Jack and Wise Counties, Texas
Barnett Shale, Jack and Wise Counties, Texas
Second Quarter Drilling and Acquisition Activity
During the three months ended June 30, 2007:
We participated in the drilling of 16 gross (16.00 net) development wells and five gross (0.87 net) exploratory wells. All of the development wells were capable of commercial production. Two of the exploratory wells were completed as producing wells and three were in various stages of completion.
We drilled 16 net wells in the Electra/Burkburnett area, of which 12 were completed as producing wells and four of which were in various stages of completion at the end of the second quarter. We own a 100% working interest in and operate all 16 of the wells.
Our capital expenditures totaled $24.0 million, of which approximately $2.1 million was allocated to lower risk development activities, $2.9 million was allocated to exploration activities, $18.7 million was expended in a producing property acquisition, and $0.3 million was expended to acquire undeveloped leasehold.
We continue to acquire and interpret additional seismic data covering a portion of our Barnett Shale acreage. As a result, we currently own 35 square miles of 3-D seismic data covering our 27,700 gross (6,800 net) acres in the Barnett Shale. The seismic data is being used to target additional drilling locations. At June 30, 2007, we owned an interest in 11 Barnett Shale producing wells, two of which we operate, seven of which are operated by Devon Energy, as successor to Chief Oil & Gas, Inc. and two of which are operated by EOG Resources, Inc.
18
In addition, another Devon Energy operated well was completed, and the first of five EOG operated wells was completed. RAM had previously proposed to EOG these five wells in an effort to accelerate the development of the company’s Barnett Shale acreage.
In our 15,000 acre Wolfcamp Shale play in West Texas, we are continuing to test two vertical wells drilled in the fourth quarter of 2006.
We are continuing to participate in a gas exploration play in the Arkoma Basin. At June 30, 2007, the Weyerhauser 9-22 was drilling while the Weyerhauser 8-22 and 10-22 were completed during the quarter and placed into production.
Second Quarter Producing Activities
the aggregate net production from all of our oil and natural gas properties was 337,000 Boe, or an average of 3,706 Boe per day;
the aggregate net production attributable to our interest in our Electra/Burkburnett properties was 144,761 Bbls of oil and 12,740 Bbls of NGLs, or 157,501 Boe, and the average daily production from these properties for the period was 1,591 Bbls of oil and 140 Bbls of NGLs, or 1,731 Boe per day;
the aggregate net production attributable to our interest in our Boonsville shallow gas properties (above the Marble Falls) was 3,420 Bbls of oil, 93 MMcf of natural gas and 18,259 Bbls of NGLs, or 37,179 Boe, and the average daily production from these properties for the period was 38 Bbls of oil, 1,017 Mcf of natural gas and 201 Bbls of NGLs, or 408 Boe per day; and
the aggregate net production attributable to our interest in our currently producing Barnett Shale wells was 1,649 Bbls of oil, 1,671 Bbls of NGLs, and 122 MMcf of natural gas, or 23,635 Boe, and the average daily production from these properties for the period was 18 Bbls of oil, 18 Bbls of NGLs and 1,339 Mcf of natural gas, or 260 Boe per day.
Net Production, Unit Prices and Costs
The following table presents certain information with respect to our oil and natural gas production, and prices and costs attributable to all oil and natural gas properties owned by us, for the three months ended June 30, 2007. Average realized prices reflect the actual realized prices received by us, before and after giving effect to the results of our derivative contract settlements. Our derivative activities are financial, and our production of oil, NGLs, and natural gas, and the average realized prices we receive from our production, are not affected by our derivative arrangements.
Production volumes:
Oil (MBbls)
NGL (MBbls)
37
Natural gas (MMcf)
684
Total (Mboe)
337
Average sale prices received:
Oil (per Bbl)
$62.54
NGL (per Bbl)
$44.64
Natural gas (per Mcf)
$6.70
Total per Boe
$53.03
Cash effect of derivative contracts:
$(0.49)
$0.00
$(0.02)
$(0.31)
19
Average prices computed after cash effect
of settlement of derivative contracts:
$62.05
$6.68
$52.72
Cash expenses (per Boe):
$3.04
$13.89
General and administrative
$7.64
$0.66
Interest (excluding amortization)
$11.83
$37.06
Capital expenditures (per Boe):
$71.36
Acquisition, Development and Exploration Capital Expenditures
The following table presents information regarding our net costs incurred in our acquisitions of proved and unproved properties, and our development and exploration activities during the three months ended June 30, 2007 (in thousands):
Development costs
$2,155
Exploration costs
2,863
Proved property acquisition costs
18,668
Unproved property acquisition costs
361
Total costs incurred
$24,047
Results of Operations
Quarter Ended June 30, 2007 Compared to Quarter Ended June 30, 2006
Revenues and Other Operating Income. Our revenues and other operating income increased by $3.8 million, or 27%, for the quarter ended June 30, 2007, compared to the quarter ended June 30, 2006. The increase was primarily a result of decreased unrealized losses on derivatives, discussed below. The following table summarizes our oil and natural gas production volumes, average sales prices and period to period comparisons, including the effect on our oil and natural gas sales, for the periods indicated:
Increase
(Decrease)
Oil and natural gas sales (in thousands):
$17,973
$17,883
(0.5)
%
202
(7.9)
32
15.6
566
20.8
Total Mboe
329
2.4
Average sale prices:
$67.35
(7.1)
$38.21
16.8
$5.54
20.9
Per Boe
$54.70
$53.06
(3.0)
Oil and Natural Gas Sales. Our oil and natural gas revenues decreased by $90,000, or 1%, for the quarter ended June 30, 2007, as compared to the quarter ended June 30, 2006. The decrease was due to a 3% decrease in product prices, offset by a 2% increase in production.
For the quarter ended June 30, 2007, our oil production decreased by 8%, our NGL production increased by 16%, and our natural gas production increased by 21%, compared to the quarter ended June 30, 2006. Our average realized sales price for oil was $62.54 per barrel for the quarter ended June 30, 2007, a decrease of 7% compared to $67.35 per barrel for the same quarter in the previous year. Our average realized NGL price for the quarter ended June 30, 2007 was $44.64 per barrel, a 17% increase compared to $38.21 per barrel for the quarter ended June 30, 2006. Our average realized natural gas price was $6.70 per Mcf for the second quarter of 2007, an increase of 21% compared to $5.54 per Mcf for the second quarter of 2006.
Other Revenues. Other revenues for the quarter ended June 30, 2007 decreased by $81,000 to $99,000, or 45%, compared to other revenues of $180,000 in the quarter ended June 30, 2006.
Realized and Unrealized Gain (Loss) from Derivatives. For the quarter ended June 30, 2007, our loss from derivatives was $207,000, compared to a loss of $4.2 million for the quarter ended June 30, 2006. Our gains and losses during these periods were the net result of recording actual contract settlements, the premium costs paid for various derivative contracts, and unrealized mark-to-market values of RAM Energy, Inc.’s derivative contracts.
Three months ended June 30,
Contract settlements and premium costs:
Oil
$ (1,784)
$ (91)
Natural gas
(259)
(14)
Realized (losses)
(2,043)
(105)
Mark-to-market gains (losses):
(2,398)
(419)
263
317
Unrealized (losses)
(2,135)
(102)
Realized and unrealized (losses)
$ (4,178)
$ (207)
Oil and Natural Gas Production Taxes. Our oil and natural gas production taxes were $1.0 million for the quarter ended June 30, 2007, compared to $874,000 for the comparable quarter of the previous year. Production taxes are based on realized prices at the wellhead. As revenues from oil and natural gas sales increase or decrease, production taxes on these sales also increase or decrease. As a percentage of oil and natural gas sales, oil and natural gas production taxes were 5.7% for the quarter ended June 30, 2007, compared to 4.9% for the quarter ended June 30, 2006.
Oil and Natural Gas Production Expense. Our oil and natural gas production expense was $4.7 million for the quarter ended June 30, 2007, an increase of $76,000, or 2%, from the $4.6 million for the quarter ended June 30, 2006. For the quarter ended June 30, 2007, our oil and natural gas production expense was $13.89 per Boe compared to $14.02 per Boe for the quarter ended June 30, 2006, a decrease of 1%. As a percentage of oil and natural gas sales, oil and natural gas production expense remained steady at 26% for the quarter ended June 30, 2007, compared to the second quarter in 2006.
Amortization and Depreciation Expense. Our amortization and depreciation expense increased $818,000, or 25%, for the quarter ended June 30, 2007, compared to the quarter ended June 30, 2006. The increase was a result of higher capitalized costs due to an $18.5 million acquisition in the second quarter. On an equivalent basis, our amortization of the full-cost pool of $4.0 million was $11.79 per Boe for the quarter ended June 30, 2007, an increase per Boe of 23% compared to $3.2 million, or $9.60 per Boe for the quarter ended June 30, 2006.
21
Accretion Expense. SFAS No. 143, Accounting for Asset Retirement Obligations, includes, among other things, the reporting of the “fair value” of asset retirement obligations. Accretion expense is a function of changes in fair value from period-to-period. We recorded $144,000 for the quarter ended June 30, 2007, compared to $132,000 for the second quarter in 2006.
Share-Based Compensation. Our Board of Directors awarded grants in accordance with our 2006 Long-Term Incentive Plan as shown in the table below. The share-based compensation on these grants was calculated using the closing price per share on each of the grant dates. The total share-based compensation on all these grants will be recognized over vesting periods ranging from one month to five years. For the quarter ended June 30, 2007, we recognized a total of $221,000 share-based compensation on these grants, a decrease of $2.0 million from the $2.2 million recognized in the quarter ended June 30, 2006. The share-based compensation was higher in the second quarter of 2006 because the 330,000 shares were issued and vested in that quarter, resulting in the recognition of the $2.2 million share-based compensation.
General and Administrative Expense. For the quarter ended June 30, 2007, our general and administrative expense was $2.6 million, compared to $2.1 million for the quarter ended June 30, 2006, an increase of $490,000, or 23%. The increase is primarily due to increased salaries caused by an increased number of employees.
Interest Income. Interest income was $313,000 for the second quarter of 2007 compared to $82,000 for the second quarter of the previous year. The increase was due to higher cash balances resulting from proceeds held from the common stock offering which closed in February of 2007.
Interest Expense. Our interest expense decreased by $1.8 million, to $4.0 million for the quarter ended June 30, 2007, compared to $5.8 million incurred for the comparable quarter of the previous year. During the second quarter of 2006 we charged off $1.1 million of unamortized costs and paid $900,000 of additional fees associated with our previous credit facility. The offsetting $200,000 increase is due to higher borrowings in the second quarter of 2007.
Income Taxes. For the quarter ended June 30, 2007, we recorded income tax expense of $415,000, on a pre-tax income of $1.3 million. For the quarter ended June 30, 2006, our income tax benefit was $1.9 million, on a pre-tax loss of $5.0 million. The effective tax rate was 32% for the second quarter of 2007 and 38% for the second quarter of 2006.
Net Income. Our net income was $902,000 for the quarter ended June 30, 2007, compared to a net loss of $3.1 million for the quarter ended June 30, 2006. The increase in our net income for the second quarter of 2007 resulted from decreased losses from derivatives and decreased interest expense.
Six Months Ended June 30, 2007 Compared to Six Months Ended June 30, 2006
Revenues and Other Operating Income. Our revenues and other operating income decreased by $400,000, or 1%, for the six months ended June 30, 2007, compared to the six months ended June 30, 2006. The decrease was a result of decreased oil and natural gas sales, offset by decreased unrealized losses on derivatives, discussed below. The following table summarizes our oil and natural gas production volumes, average sales prices and period to period comparisons, including the effect on our oil and natural gas sales, for the periods indicated:
22
$34,783
$33,027
(5.1)
389
368
(5.5)
63
71
12.7
1,265
8.5
647
650
0.5
$64.32
$59.50
(7.5)
$38.61
$41.40
7.2
$6.27
$6.47
3.2
$53.79
$50.80
(5.6)
Oil and Natural Gas Sales. Our oil and natural gas revenues decreased by $1.8 million, or 5%, for the six months ended June 30, 2007, as compared to the six months ended June 30, 2006. The decrease was due to a 6% decrease in product prices, offset by a 1% increase in production.
For the six months ended June 30, 2007, our oil production decreased by 6%, our NGL production increased by 13%, and our natural gas production increased by 9%, compared to the six months ended June 30, 2006. Our average realized sales price for oil was $59.50 per barrel for the six months ended June 30, 2007, a decrease of 8% compared to $64.32 per barrel for the same period in the previous year. Our average realized NGL price for the six months ended June 30, 2007 was $41.40 per barrel, a 7% increase compared to $38.61 per barrel for the six months ended June 30, 2006. Our average realized natural gas price was $6.47 per Mcf for the six months ended June 30, 2007, an increase of 3% compared to $6.27 per Mcf for the same period in 2006.
Other Revenues. Other revenues for the six months ended June 30, 2007 decreased by $122,000 or 29%, compared to other revenues of $424,000 in the six month period ended June 30, 2006.
Realized and Unrealized Gain (Loss) from Derivatives. For the six months ended June 30, 2007, our loss from derivatives was $1.3 million, compared to a loss of $2.8 million for the six months ended June 30, 2006. Our gains and losses during these periods were the net result of recording actual contract settlements, the premium costs paid for various derivative contracts, and unrealized mark-to-market values of RAM Energy, Inc.’s derivative contracts.
Six months ended June 30,
$ (3,012)
$ (90)
(602)
(45)
(3,614)
(135)
(2,968)
(826)
3,812
(330)
Unrealized gains (losses)
844
(1,156)
$ (2,770)
$ (1,291)
Oil and Natural Gas Production Taxes. Our oil and natural gas production taxes were $1.9 million for the six months ended June 30, 2007, compared to $1.7 million for the first six months of the previous year. Production taxes are based on realized prices at the wellhead. As revenues from oil and natural gas sales increase or decrease, production taxes on these sales also increase or decrease. As a percentage of oil and natural gas sales, oil and
23
natural gas production taxes were 5.6% for the six months ended June 30, 2007, compared to 4.8% for the six months ended June 30, 2006.
Oil and Natural Gas Production Expense. Our oil and natural gas production expense was $9.2 million for the six months ended June 30, 2007, an increase of $297,000, or 3%, from the $8.9 million for the six months ended June 30, 2006. The increase was primarily due to higher workover costs in the first quarter of 2007. For the six months ended June 30, 2007, our oil and natural gas production expense was $14.17 per Boe compared to $13.78 per Boe for the six months ended June 30, 2006, an increase of 3%. As a percentage of oil and natural gas sales, oil and natural gas production expense was 28% for the first six months of 2007, a 2% increase compared to the same period in 2006.
Amortization and Depreciation Expense. Our amortization and depreciation expense increased $1.0 million, or 16%, for the six months ended June 30, 2007, compared to the six months ended June 30, 2006. The increase was a result of higher capitalized costs due to increased drilling and an $18.5 million acquisition in the second quarter. On an equivalent basis, our amortization of the full-cost pool of $7.3 million was $11.15 per Boe for the six months ended June 30, 2007, an increase per Boe of 17% compared to $6.2 million, or $9.55 per Boe for the first six months of 2006.
Accretion Expense. SFAS No. 143, Accounting for Asset Retirement Obligations, includes, among other things, the reporting of the “fair value” of asset retirement obligations. Accretion expense is a function of changes in fair value from period-to-period. We recorded $290,000 for the six months ended June 30, 2007, compared to $265,000 for the six months ended June 30, 2006, an increase of 9%.
Share-Based Compensation. Our Board of Directors awarded grants in accordance with our 2006 Long-Term Incentive Plan as shown in the table below. The share-based compensation on these grants was calculated using the closing price per share on each of the grant dates. The total share-based compensation on all these grants will be recognized over vesting periods ranging from one month to five years. For the six months ended June 30, 2007, we recognized a total of $394,000 share-based compensation on these grants, a decrease of $1.8 million from the $2.2 million recognized in the six months ended June 30, 2006. The share-based compensation was higher in the six months ended June 30, 2006 because the 330,000 shares issued in the second quarter of 2006 also vested in that quarter, resulting in the recognition of the $2.2 million share-based compensation.
General and Administrative Expense. For the six months ended June 30, 2007, our general and administrative expense was $4.9 million, compared to $4.0 million for the six months ended June 30, 2006, an increase of $900,000, or 22%. The increase is primarily due to increased salaries caused by an increased number of employees.
Interest Income. Interest income was $520,000 for the six months ended June 30, 2007 compared to $109,000 for the first six months of the previous year. The increase was due to higher cash balances resulting from proceeds held from the common stock offering which closed in February of 2007.
Interest Expense. Our interest expense decreased by $1.5 million, to $7.8 million for the six months ended June 30, 2007, compared to $9.3 million incurred for the first six months of the previous year. Interest expense was higher during the six months ended June 30, 2006 because we charged off $1.1 million of unamortized costs and paid $900,000 of additional fees associated with our previous credit facility. The offsetting $500,000 increase is due to higher borrowings in the 2007 period.
Income Taxes. For the six months ended June 30, 2007, we recorded income tax expense of $186,000, on pre-tax income of $508,000. For the six months ended June 30, 2006, we recorded an income tax benefit of
24
$157,000, on a pre-tax loss of $412,000. The effective tax rate was 37% for the six months ended June 30, 2007 and 38% for the first six months of 2006.
Net Income. Our net income was $322,000 for the six months ended June 30, 2007, compared to a net loss of $255,000 for the six months ended June 30, 2006. The increase in our net income for the first six months of 2007 resulted from decreased losses from derivatives and decreased interest expense, offset by decreased oil and natural gas sales.
Liquidity and Capital Resources
As of June 30, 2007, we had cash and cash equivalents of $28.5 million and $21.0 million was available under our revolving credit facility. At that date, we had $147.8 million of indebtedness outstanding, including $119.0 million under our credit facility, $28.4 million principal amount ($28.3 million net of the original issue discount) of indebtedness evidenced by RAM Energy’s 11½% senior notes due 2008, and $0.4 million in other indebtedness.
Credit Facility. On April 5, 2006, RAM Energy entered into a Third Amended and Restated Loan Agreement with Guggenheim Corporate Funding, LLC, for itself and as Agent for a group of lenders. This new facility, which we refer to as the Guggenheim facility, amended, restated and replaced a prior credit facility known as the Foothill facility. Currently, we are not a party to, or a guarantor of obligations under, the Guggenheim facility. As part of the transaction creating the Guggenheim facility, Foothill assigned the notes and liens under the Foothill facility to the Agent for the lenders under the Guggenheim facility. The Guggenheim facility includes a $150.0 million revolving credit facility of which $50.0 million was immediately available, and a $150.0 million term loan facility of which $90.0 million was advanced at closing. The remainder of the term loan facility may become available, subject to approval of each lender desiring to fund its proportionate share of the additional term loan advance, for certain of the future needs of RAM Energy, including acquisitions. The Guggenheim revolving credit facility is scheduled to mature in four years, during which time amounts may be borrowed, repaid and re-borrowed, subject to a borrowing base limitation to be determined by the lenders. The term loan facility is scheduled to mature in five years, with permitted prepayments after the first year, subject to a prepayment premium in the second and third years of the term. Advances under the revolving credit facility bear interest at LIBOR plus 2% per annum, while amounts outstanding under the term loan bear interest at LIBOR plus 5.5% to 6.0% per annum. Obligations under the Guggenheim facility are secured by liens on substantially all of the assets of RAM Energy and its subsidiaries. The initial advance under the Guggenheim facility was used to refinance the Foothill facility, to pay expenses associated with establishing the Guggenheim facility, and to fund a $10.0 million redemption payment. Subsequent advances may be used to:
repurchase all of RAM Energy’s outstanding 11½% senior notes due 2008 ($28.4 million principal amount); and
fund general working capital purposes.
The Guggenheim facility contains financial covenants requiring RAM Energy to maintain certain ratios, including a current ratio, a ratio of earnings before interest, taxes, depreciation and amortization, or EBITDA, to interest expense, a ratio of total indebtedness to EBITDA, and a ratio of asset value to total indebtedness. In addition, the Guggenheim facility contains other affirmative and negative covenants customary in lending transactions of this nature, including the maintenance by RAM Energy of derivative contracts on not less than 50% nor more than 85% of RAM Energy’s projected oil and natural gas production from its properties on a rolling 24-month period; provided that the derivative requirements will be waived for any quarter in which RAM Energy’s leverage ratio is less than 2.0 to 1.0. At June 30, 2007 RAM Energy was in compliance with all of its covenants in the Guggenheim facility.
Senior Notes. On February 24, 1998, RAM Energy issued $115.0 million principal amount of its 11½% senior notes which mature February 15, 2008. Currently, we are not a party to, or a guarantor of, the senior notes or
of any obligations under the indenture covering the senior notes. At June 30, 2007, RAM Energy had outstanding $28.4 million aggregate principal amount of its senior notes. The notes bear interest at an annual rate of 11½%, payable semi-annually on each February 15 and August 15. Pursuant to a Second Supplemental Indenture executed in November 2002, substantially all of the restrictive covenants and certain events of default contained in the original indenture were eliminated.
Cash Flow From Operating Activities. Our cash flow from operating activities is comprised of three main items: net income (loss), adjustments to reconcile net income to cash provided (used) before changes in working capital, and changes in working capital. For the six months ended June 30, 2007, our net income was $322,000, as compared with a net loss of $255,000 for the six months ended June 30, 2006. Adjustments (primarily non-cash items such as depreciation and amortization, unrealized gain or loss on derivatives, share-based compensation and deferred income taxes) were $9.7 million for the six months ended June 30, 2007 compared to $9.5 million for the first six months of 2006, an increase of $200,000. Share-based compensation, offset by changes in depreciation and unrealized loss on derivatives caused most of this decrease. Working capital changes for the six months ended June 30, 2007 were a negative $2.6 million compared with positive changes of $6.1 million for the six months ended June 30, 2006. For the six months ended June 30, 2007, in total, net cash provided by operating activities was $7.5 million compared to $15.4 million of net cash provided by operations for the first six months of the previous year.
Cash Flow From Investing Activities. For the six months ended June 30, 2007, net cash used in our investing activities consisted of $28.5 million in payments for oil and gas properties and equipment and $100,000 in payments for other property and equipment, offset by $50,000 in proceeds from sales of oil and gas properties. For the six months ended June 30, 2006, net cash used in our investing activities was $7.2 million, consisting of $10.5 million in payments for oil and gas properties and $566,000 for other property and equipment additions, offset by $3.5 million in proceeds from sales of oil and gas properties and $366,000 in proceeds from sales of other property and equipment.
Cash Flow From Financing Activities. For the six months ended June 30, 2007, net cash provided by our financing activities was $42.9 million, compared to net cash provided of $4.7 million for the six months ended June 30, 2006. The cash provided in the first two quarters of 2007 included $27.4 million in net proceeds from a common stock offering and $16.0 million in borrowings on our revolving credit facility, partially offset by a $500,000 net debt decrease.
Capital Commitments
During the six months ended June 30, 2007, we had capital expenditures of $28.5 million relating to our oil and gas operations, of which $5.3 million was allocated to drilling new development wells, $4.3 million was for exploratory costs, $18.7 million was for proved property acquisitions and $373,000 was for unproved acquisitions. We have budgeted an aggregate of $36.3 million for similar capital expenditures for the year 2007. However, the amount and timing of our capital expenditures may vary depending on the rate at which we expand and develop our oil and natural gas properties. We may require additional financing for future acquisitions and to refinance our debt before or at its final maturities.
Subsequent Events
We increased our 2007 non-acquisition capital expenditure budget by $6.0 million to $36.3 million due to increased drilling and developmental activity on our Barnett Shale acreage. The 20% increase is a result of additional drilling on our inventory of seismically identified locations.
On May 15, 2007, we executed a definitive agreement with an unaffiliated, privately held company to purchase certain oil and natural gas properties on which are located 120 wells in the Permian Basin area of Southeast New Mexico and West Texas. We acquired a 100 percent working interest and operate all of the acquired properties. The aggregate purchase price for the leases $18.7 million. Daily net production from these wells averaged 217 Bbls of oil and 269 Mcf of gas since the effective date of the acquisition, and net cash flow from these wells for calendar year 2006 totaled $4.1 million.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The carrying amounts reported in our consolidated balance sheets for cash and cash equivalents, trade receivables and payables, installment notes and variable rate long-term debt approximate their fair values.
Interest Rate Risk
We are exposed to changes in interest rates. Changes in interest rates affect the interest earned on our cash and cash equivalents and the interest rate paid on our borrowings, other than the RAM Energy’s senior notes. We have not used interest rate derivative instruments to manage our exposure to interest rate changes.
Oil and Natural Gas Marketing and Derivative Status
Our revenue, profitability and future growth depend substantially on prevailing prices for oil and natural gas. Prices also affect the amount of cash flow available for capital expenditures and our ability to borrow and raise additional capital. Lower prices may also reduce the amount of oil and natural gas that we can economically produce. We currently sell most of our oil and natural gas production under market price contracts.
During the quarter ended June 30, 2007, Shell Trading-US accounted $9.3 million or approximately 52% and Targa Midstream Services accounted for $2.1 million, or approximately 12% of our revenue from the sales of oil and natural gas.
To reduce exposure to fluctuations in oil and natural gas prices and to achieve more predictable cash flow, we periodically utilize various derivative strategies to manage the price received for a portion of our future oil and natural gas production. We have not established derivatives in excess of our expected production.
Our derivative positions at June 30, 2007 are shown in the following table:
$52.67
$72.58
$7.70
$12.67
$56.01
$83.39
$6.87
$13.53
$56.55
$75.35
$7.00
$10.98
$12.00
$75.00
ITEM 4 - CONTROLS AND PROCEDURES
Our principal executive officer (“CEO”) and principal financial officer (“CFO”) evaluated, together with other members of senior management, the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2007. Based on this review, our CEO and CFO concluded that, as of June 30, 2007, our disclosure controls and procedures were effective, despite the restatement discussed below, to ensure that information required to be disclosed by us in our reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
On August 9, we filed an amended 10-K and restated our financial statements as of December 31, 2006 and 2005 to change the accounting for outstanding common shares and related earnings per share related to our reverse acquisition that closed in May 2006. We amended our 10-Q for the quarter ended March 31, 2007 for the same
reasons. The restatements were isolated to one component of accounting for a reverse acquisition, a transaction that is non-routine and which will not occur again in the future, and did not affect our earnings. Our CEO and CFO concluded that this one-time restatement was not the result of a material weakness in our internal control over financial reporting and, therefore, no modifications of our internal controls over financial reporting were necessary.
As part of our implementation of Sarbanes-Oxley Section 404, we are currently evaluating controls over the accounting of outstanding common shares and related earnings per share related to a reverse acquisition, and will enhance controls if we determine necessary.
There has been no other change in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d) - 15(f)) during the quarterly period ended June 30, 2007 that has materially effected, or is reasonably likely to materially effect, our internal control over financial reporting.
Forward-Looking Statements
The description of our plans and expectations set forth herein, including expected capital expenditures and acquisitions, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These plans and expectations involve a number of risks and uncertainties. Important factors that could cause actual capital expenditures, acquisition activity or our performance to differ materially from the plans and expectations include, without limitation, our ability to satisfy the financial covenants of our outstanding debt instruments and to raise additional capital; our ability to manage our business successfully and to compete effectively in our business against competitors with greater financial, marketing and other resources, and adverse regulatory changes. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to update or revise these forward-looking statements to reflect events or circumstances after the date hereof including, without limitation, changes in our business strategy or expected capital expenditures, or to reflect the occurrence of unanticipated events.
PART II – OTHER INFORMATION
ITEM 1 – LEGAL PROCEEDINGS
Previously reported. Reference is made to Item 1 in the Registrant’s annual report on Form 10-K for the year ended December 31, 2006, for a discussion of pending legal proceedings to which the Registrant is a party.
ITEM 1A – RISK FACTORS
Previously reported.
ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3 – DEFAULTS UPON SENIOR SECURITIES
ITEM 4 – SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Our 2007 Annual Meeting of Stockholders was held on June 12, 2007. At the meeting, the following items were submitted to a vote of stockholders:
(a)
Election of Directors. Mr. Lee was elected director to serve until the 2010 Annual Meeting of Stockholders. Mr. Lee received 40,957,099 votes, or 99% of all votes cast by the holders of common stock present in person or represented by proxy at the meeting, with a total of 182,547 broker non-votes. Mr. Marshall was elected director to serve until the 2009 Annual Meeting of Stockholders. Mr. Marshall received 40,930,418 votes, or 99% of all votes cast by the holders of common stock present in person or
represented by proxy at the meeting, with a total of 182,547 broker non-votes. John M. Reardon and Sean P. Lane both continue to serve as directors on our board of directors.
(b)
Ratification of Independent Auditors. The ratification of the appointment of UHY as our independent auditors for 2007 received 40,955,851 votes, or 99% of all votes cast by the holders of common stock present in person or represented by proxy at the meeting, with a total of 182,547 broker nonvotes. A total of 11,467 shares were voted against ratification, and there were 12,813 abstentions.
ITEM 5 – OTHER INFORMATION
29
ITEM 6 – EXHIBITS
Exhibit No.
Description
Method of Filing
3.1
Amended and Restated Certificate of Incorporation of the Registrant.
(1) [3.1]
Amended and Restated Bylaws of the Registrant.
(13) [3.2]
4.1
Specimen Unit Certificate.
(1) [4.1]
4.2
Specimen Common Stock Certificate.
(1) [4.2]
4.3
Specimen Warrant Certificate.
(12) [4.3]
4.4
Form of Unit Purchase Option granted to EarlyBirdCapital, Inc.
(2) [4.4]
4.5
Form of Warrant Agreement between Continental Stock Transfer & Trust Company and the Registrant.
(12) [4.5]
4.6
Indenture dated as of February 24, 1998 among RAM Energy, Inc., the Subsidiary Guarantors named therein, and United States Trust Company of New York, Trustee.
(7) [4.1]
4.6.1
Supplemental Indenture dated February 24, 1998 among RAM Energy, Inc., the Subsidiary Guarantors named therein, and United States Trust Company of New York, Trustee.
(8) [4.6.1]
4.6.2
Second Supplemental Indenture dated as of November 22, 2002 among RAM Energy, Inc., the Subsidiary Guarantors and The Bank of New York, Successor to United States Trust Company of New York, as trustee.
(8) [4.6.2]
4.6.3
Third Supplemental Indenture dated as of April 29, 2004 among RAM Energy, Inc., the Subsidiary Guarantors and The Bank of New York, Successor to United States Trust Company of New York, as trustee.
(8) [4.6.3]
4.6.4
Fourth Supplemental Indenture dated as of December 17, 2004 among RAM Energy, Inc., The Bank of New York, Successor to United States Trust Company of New York, as trustee, RWG Energy, Inc., WG Operating, Inc., WG Royalty Company, Wise County Construction Company, LLC, and WG Pipeline LLC, as Additional Subsidiary Guarantors.
(8) [4.6.4]
10.1
Form of Stock Escrow Agreement between the Registrant, Continental Stock Transfer & Trust Company and the Initial Stockholders.
(2) [10.6]
10.2
Form of Registration Rights Agreement among the Registrant and the Initial Stockholders.
(2) [10.9]
10.2.1
Amendment to Registration Rights Agreement among this Registrant and the Founders dated May 8, 2006.
(1) [10.9.1]
10.3
Agreement and Plan of Merger dated October 20, 2005 among Registrant, RAM Acquisition, Inc., RAM Energy, Inc. and the Stockholders of RAM Energy, Inc.
(3) [10.1]
30
10.3.1
Amendment No. 1, dated November 11, 2005, to Agreement and Plan of Merger dated October 20, 2005 among the Registrant, RAM Acquisition, Inc., RAM Energy, Inc. and the Stockholders of RAM Energy, Inc.
(4) [10.11]
10.3.2
Amendment No. 2, dated February 15, 2006, to Agreement and Plan of Merger dated October 20, 2005 among the Registrant, RAM Acquisition, Inc., RAM Energy, Inc. and the Stockholders of RAM Energy, Inc.
(6) [10.12]
10.4
Voting Agreement dated October 20, 2005 among the Registrant, the stockholders of RAM Energy, Inc. and certain security holders of the Registrant.
(3) [10.2]
10.4.1
Second Amended and Restated Voting Agreement
(5) [Annex D]
10.5
Lock-Up Agreement dated October 20, 2005 executed by the stockholders of RAM Energy, Inc.
(3) [10.4]
10.6
Employment Agreement between Registrant and Larry E. Lee dated May 8, 2006.*
(1) [10.15]
10.6.1
First Amendment to Employment Agreement between Registrant and Larry E. Lee dated October 18, 2006.*
(9) [10.1]
10.7
Escrow Agreement by and among the Registrant, Larry E. Lee and Continental Stock Transfer & Trust Company dated May 8, 2006.
(1) [10.16]
10.8
Registration Rights Agreement among Registrant and the investors signatory thereto dated May 8, 2006.*
(1) [10.17]
10.9
Form of Registration Rights Agreement among the Registrant and the Investors party thereto.
(3) [10.7]
10.10
Agreement between RAM and Shell Trading-US dated February 1, 2006.
(1) [10.22]
10.11
Agreement between RAM and Targa dated January 30, 1998.
(1) [10.23]
10.11.1
Amendment to Agreement between RAM Energy and Targa dated effective as of April 1, 2006.
(10) [10.23.1]
10.12
Long-Term Incentive Plan of the Registrant. *
(5) [Annex C]
10.13
Third Amended and Restated Loan Agreement dated as of April 3, 2006, between RAM Energy, Inc., the lenders described therein, Guggenheim Corporate Funding, LLC as the Arranger and Administrative Agent, Wells Fargo Foothill, Inc., as the Documentation Agent, and WESTLB AG, New York Branch, as the Syndication Agent.
(11) [10.14]
10.13.1
First Amendment to Third Amended and Restated Loan Agreement between RAM Energy, Inc., the lenders described therein, Guggenheim Corporate Funding, LLC, as the Arranger and Administrative Agent, , Wells Fargo Foothjll, Inc., as the Documentation Agent, and WEST LB AG, New York Branch, as the Syndication Agent., dated as of August 8, 2007.
**
10.14
Deferred Bonus Compensation Plan of RAM Energy, Inc. dated as of April 21, 2004*
(12) [10.14]
10.15
Purchase and Sale Agreement dated May 10, 2007 between Layton Enterprises, Inc. and the Registrant (exhibits and schedules intentionally omitted).
31.1
Certifications pursuant to Rule 13(a)-14(a)/15(d)-14(a) of the Chairman, President and Chief Executive Officer
31.2
Certifications pursuant to Rule 13(a)-14(a)/15(d)-14(a) of the Senior Vice President and Chief Financial Officer
32.1
Certifications pursuant to Section 1350 of the Chairman, President and Chief Executive Officer
32.2
Certifications pursuant to Section 1350 of the Senior Vice President and Chief Financial Officer
*
Management contract or compensatory plan or arrangement.
** Filed herewith.
(1)
Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on May 12, 2006, as the exhibit number indicated in brackets and incorporated by reference herein.
(2)
Filed as an exhibit to the Registrant’s Registration Statement on Form S-1 (SEC File No. 333-113583) as the exhibit number indicated in brackets and incorporated by reference herein.
(3)
Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on October 26, 2005, as the exhibit number indicated in brackets and incorporated by reference herein.
(4)
Filed as an exhibit to the Registrant’s Current Report on Form 8-K/A filed on November 14, 2005, as the exhibit number indicated in brackets and incorporated by reference herein.
(5)
Included as an annex to the Registrant’s Definitive Proxy Statement (No. 000-50682), dated April 12, 2006, as the annex letter indicated in brackets and incorporated by reference herein.
(6)
Filed as an exhibit to the Registrant’s Current Report on Form 8-K/A filed on February 21, 2006, as the exhibit number indicated in brackets and incorporated by reference herein.
(7)
Filed as an exhibit to the Registration Statement on Form S-1 (SEC File No. 333-42641) of RAM Energy, Inc., as the exhibit number indicated in brackets and incorporated by reference herein.
(8)
Filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q filed on August 14, 2006, as the exhibit number indicated in brackets and incorporated by reference herein.
(9)
Filed as an exhibit to the Registrant’s Current Report on Form 8-K on October 20, 2006, as the exhibit number indicated in brackets and incorporated by reference herein.
Filed as an exhibit to Registrant’s Form 8-K dated June 5, 2006 as the exhibit number indicated in brackets and incorporated by reference herein.
(11)
Filed as an exhibit to Registrant’s Form 10-Q/A dated December 20, 2006 as the exhibit number indicated in brackets and incorporated by reference herein.
(12)
Filed as an exhibit to the Registrant’s Registration Statement on Form S-1 (SEC File No. 333-`138922) as the exhibit number indicated in brackets and incorporated by reference herein.
(13)
Filed as an exhibit to Registrant’s Form 8-K dated February 2, 2007 as the exhibit number indicated in brackets and incorporated by reference herein
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 hereunto duly authorized.
RAM ENERGY RESOURCES, INC.
August 9, 2007
/s/ Larry E. Lee
Name: Larry E. Lee
Title: Chairman, President and Chief Executive Officer
EXHIBIT INDEX
Incorporated herein by reference
33
Employment Agreement between Registrant and Larry E. Lee dated May 8, 2006.
First Amendment to Employment Agreement between Registrant and Larry E. Lee dated October 18, 2006.
Registration Rights Agreement among Registrant and the investors signatory thereto dated May 8, 2006.
34
Long-Term Incentive Plan of the Registrant.
Filed herewith electronically
35