Synergy Resources Corporation Announces Quarterly Results

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Apr 12, 2011, 02:37 ET

DENVER, April 12, 2011 /PRNewswire/ -- Synergy Resources Corporation (OTCBB: SYRG), a domestic oil and gas exploration and production company focused in the Denver-Julesburg Basin (the "D-J Basin"), reported results for the quarter ended February 28, 2011 (the "Quarter").

Increased Production:

Revenue for the Quarter was $2,053,534 or $0.0956 per share, up over 500% from $335,725 in 2Q-2010. The improvement reflects the increase in the Company's number of producing wells. As of April 11, 2011, the Company had 60 gross wells, including 48 producing wells, and 10 wells in progress. All wells are located in the Wattenberg Field of the D-J Basin. Net oil and gas production for the Quarter was approximately 34,733 BOE or 386 BOEPD. As of February 28th 2011, Synergy Resources had estimated proved reserves of 641,572 Bbls of oil and 4,313,939 Mcf of gas.

Increased Acreage:

Throughout the quarter, Synergy has significantly expanded its footprint in the D-J Basin and as of April 11th 2011, Synergy had an approximately 116,000 gross acres (100,000 net acres) under lease. This is approximately a 100,000 gross acre increase from the same time last year. Synergy also is contemplating a transaction with Petroleum Exploration & Management LLC to potentially acquire interests in 87 producing oil and gas wells, one shut-in well and leases covering 6,968 gross acres in the D-J Basin.

Improved Cash Position:

As of February 28, 2011, Synergy had cash of over $21,000,000 on its balance sheet, up from approximately $4,700,000 as of November 30, 2010. The increased cash position is a result of an increase in cash flow from operations and $16,690,721 of net proceeds from a private placement of common stock in January 2011.

Financial Results

For the Quarter, Synergy had an operating income of $686,413 compared to an operating loss of $130,438 for the same period a year prior. Synergy posted a net loss for the Quarter of $11,738,360 compared to a net loss of $543,661 a year prior. The net loss for the quarter included a $9,926,158 non-cash change in the fair value of the derivative conversion liability and $2,514,045 in interest expense. Frank Jennings, CFO of Synergy Resources Corporation, noted "Our financial results for the quarter reflect approximately $12.4 million in non-cash charges and interest expense associated with our convertible notes. As of March 31, 2011, all of the note holders had elected to convert their notes into shares of common stock, which will eliminate the non-cash charges and interest expense after March 31, 2011. We look forward to reporting results in the future that will no longer be encumbered by these charges."

Ed Holloway, CEO of Synergy Resources Corporation, stated "We had a record quarter and I am quite pleased with our results. Our revenue topped $2 million for the quarter, and we continue the upward trend as we bring more wells into production. Having over $20,000,000 of cash and no debt on our balance sheet will help us further implement our business plan. We will continue to look to expand our acreage, reserves, and production in the D-J Basin in order to maximize our shareholder's value."

SYNERGY RESOURCES CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)

	Three Months Ended February 28,				Six Months Ended February 28,
		2011		2010		2011		2010

Revenues:
Oil and gas revenues	$	2,033,687	$	335,725	$	3,477,282	$	388,511
Service revenues		19,847		-		27,289		-
Total revenues		2,053,534		335,725		3,504,571		388,511

Expenses:
Lease operating expenses		260,480		47,152		463,155		55,042
Depreciation, depletion, and amortization		647,205		64,733		1,232,186		92,939
General and administrative		459,436		354,278		1,111,979		635,410
Total expenses		1,367,121		466,163		2,807,320		783,391

Operating income (loss)		686,413		(130,438)		697,251		(394,880)

Other income (expense):
Change in fair value of derivative conversion liability		(9,926,158)		-		(10,315,421)		-
Interest expense, net		(2,514,045)		(414,136)		(3,296,084)		(414,136)
Interest income		15,430		913		15,891		3,686
Total other income (expense)		(12,424,773)		(413,223)		(13,595,614)		(410,450)

Net loss	$	(11,738,360)	$	(543,661)	$	(12,898,363)	$	(805,330)

Net loss per common share:
Basic and Diluted		(0.55)		(0.05)		(0.73)		(0.07)

Weighted average shares outstanding:
Basic and Diluted		21,487,951		11,998,000		17,580,331		11,998,000

SYNERGY RESOURCES CORPORATION
CONDENSED BALANCE SHEETS

			As of		As of
			February 28, 2011		August 31, 2010
			(unaudited)
ASSETS
Current assets:
	Cash and cash equivalents		$	21,161,538	$	6,748,637
	Accounts receivable			3,962,054		3,176,320
	Inventory			506,845		387,864
	Other current assets			81,401		12,310
		Total current assets		25,711,838		10,325,131

Property and equipment:
	Oil and gas properties, full cost method, net			16,500,170		12,692,194
	Other property and equipment, net			217,533		150,789
		Property and equipment, net		16,717,703		12,842,983

Other assets				507,528		1,673,799

		Total assets	$	42,937,069	$	24,841,913

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Accounts payable			4,961,604		3,570,231
	Accrued expenses			856,281		517,921
		Total current liabilities		5,817,885		4,088,152

Asset retirement obligations				346,204		254,648
Convertible promissory notes, net of debt discount				4,946,032		12,190,945
Derivative conversion liability				10,246,260		9,325,117
		Total liabilities		21,356,381		25,858,862

Shareholders' equity:
	Common stock and paid in capital			57,818,475		22,322,474
	Accumulated (deficit)			(36,237,787)		(23,339,423)
		Total shareholders' equity		21,580,688		(1,016,949)

		Total liabilities and shareholders' equity	$	42,937,069	$	24,841,913

SYNERGY RESOURCES CORPORATION OPERATIONAL DATA
	Three Months Ended February 28,
	2011		2010
Production:
Oil (Bbls)		19,511		2,857
Gas (Mcf)		91,333		19,480

Total production in BOE		34,733		6,104

Revenues:
Oil	$	1,631,905	$	198,392
Gas		401,782		137,333
Total	$	2,033,687	$	335,725

Average sales price:
Oil (Bbls)	$	83.64	$	69.44
Gas (Mcf)	$	4.40	$	7.05

	Three Months Ended February 28,
	2011		2010

Production costs	$	55,471	$	13,345
Severance and ad valorem taxes		205,009		33,807
Total lease operating expenses	$	260,480	$	47,152

Per BOE:
Production costs	$	1.60	$	2.19
Severance and ad valorem taxes		5.90		5.54
Total per BOE	$	7.50	$	7.73

About Synergy Resources Corporation

Synergy Resources Corporation is a domestic oil and natural gas exploration and production company. Synergy's core area of operations is in the Denver-Julesburg Basin, which encompasses Colorado, Wyoming, Kansas, and Nebraska. The Wattenberg field in the D-J Basin ranks as the 7th largest field in the U.S. in terms of proved gas reserves and 9th in production. Synergy's corporate offices are located in Platteville, Colorado. More company news and information is available at www.SYRGinfo.com.

This press release may contain forward-looking statements. The actual results could differ materially from a conclusion, forecast or projection in the forward-looking information. Certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information.

SOURCE Synergy Resources Corporation