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Saratoga Resources, Inc. Reports Fourth Quarter And 2011 Financial Results, Increased Reserves And New Production Milestone

Development Plans

  • Low risk recompletions, thru-tubing plugbacks and workovers from inventory of 55 proved developed non-producing (“PDNP”) opportunities in 8 fields;
  • Development of proved undeveloped (“PUD”) reserves from inventory of 86 PUD opportunities in 24 wellbores in 5 fields;
  • Strategic partnerships and joint ventures for risk-sharing on exploratory drilling of deep and ultra-deep prospects at Grand Bay and Vermilion 16.

Our near term development plans are focused on proved undeveloped opportunities and conversion of PDNP opportunities. At December 31, 2011, permitting had been completed on 5 proved undeveloped wells and permitting was underway on 5 additional proved undeveloped wells, including 3 wells in our Vermilion 16 field. We presently anticipate drilling 6 proved undeveloped wells during 2012 and 5 to 6 development wells annually thereafter.

In the fourth quarter of 2011, we commenced negotiations with McMoRan Exploration regarding the possible formation of a joint venture to explore ultra-deep prospects in our Vermilion 16 field. Those negotiations are ongoing.

Financial Position and CAPEX Highlights

  • $15.9 million of cash on hand at December 31, 2011, up from $4.4 million at December 31, 2010;
  • $41.9 million of shareholders’ equity at December 31, 2011, up from a deficit of $4.1 million at December 31, 2010;
  • $35 million of equity raised during 2011 from sale of common stock and warrants;
  • $127.5 million of new debt raised during 2011 from sale of senior secured notes; funds used to retire prior credit facilities and letter of credit obligations; extended maturity of debt to July 2016;
  • $25.9 million of CAPEX for 2011;
  • $47.6 million CAPEX budgeted for 2012; and
  • 2012 CAPEX budget fully funded by cash on hand and projected operating cash flow.

Management Comments

Thomas Cooke, Chairman and CEO, commented, “2011 was an exciting year for Saratoga on many fronts. We achieved significant milestones and gained momentum across our business and enter 2012 in demonstrably the best position in our company’s history and well positioned to realize what we believe is the great untapped potential of our resource portfolio. We have experienced four continuous years of growth in production and reserves and expect to continue this trend going forward.

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