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

With increasing liquidity from our improving operating cash flows and equity infusions, we substantially increased our development budget to $25.9 million during 2011, up from $9.9 in 2010, and project sufficient cash flow to execute our current 2012 capex program of approximately $47 million. We continue to evaluate the addition of a revolving credit facility to supplement our liquidity, and expect to add such a facility during 2012.

We have now achieved our long standing goal of listing on a national securities exchange with the commencement of trading in our stock on the NYSE Amex while also markedly increasing our profile in the investment community.

2011 was a year in which we began to see the results of the last four years of hard work from our team under very challenging circumstances. We are gratified and more excited than ever entering 2012.”

Guidance

Management estimates 2012 production will be 40% to 50% higher than 2011 production.

Conference Call Information

The company will host a conference call to discuss these results on March 26, 2012 at 10:30 AM EDT (9:30 AM CDT, 7:30 AM PDT) and interested parties in the U.S. can participate in the call by dialing (866) 501-1535. Interested international parties can participate in the call by dialing (216) 672-5582. The participant passcode for both the U.S. and international call is 63409603. Alternatively, the audio content of the call can be accessed on the Company’s web site at www.saratogaresources.com. The call will be archived on the Company web site for parties who are unable to listen to the live call.

About Saratoga Resources

Saratoga is an independent exploration and production Company with offices in Houston, Texas and Covington, Louisiana. Principal holdings cover 32,185 gross/net acres, mostly held-by-production, currently located in the transitional coastline and protected in-bay environment on parish and state leases of south Louisiana. For more information, go to our website at www.saratogaresources.com and sign up for regular updates by clicking on the Updates button.

Forward-Looking Statements

This press release includes certain estimates and other forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, including statements regarding future ability to fund the company’s development program and grow reserves, production, revenues and profitability, ability to reach and sustain target production levels, ability to secure commitments to participate in exploration of deep shelf prospects, ability to put in place a revolving credit facility and the ultimate outcome of such efforts. Words such as "expects”, "anticipates", "intends", "plans", "believes", "assumes", "seeks", "estimates", "should", and variations of these words and similar expressions, are intended to identify these forward-looking statements. While we believe these statements are accurate, forward-looking statements are inherently uncertain and we cannot assure you that these expectations will occur and our actual results may be significantly different. These statements by the Company and its management are based on estimates, projections, beliefs and assumptions of management and are not guarantees of future performance. Important factors that could cause actual results to differ from those in the forward-looking statements include the factors described in the "Risk Factors" section of the Company's filings with the Securities and Exchange Commission. The Company disclaims any obligation to update or revise any forward-looking statement based on the occurrence of future events, the receipt of new information, or otherwise.
 

SARATOGA RESOURCES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
 

For the Three Months Ended December 31,
2011     2010
Revenues:
Oil and gas revenues $ 22,700,127 $ 14,407,610
Other revenues   406,446     558,406  
 
Total revenues 23,106,573 14,966,016
 
Operating (Income) Expense:
Lease operating expense 4,833,702 3,617,752
Workover expense 1,443,615 123,121
Exploration expense 23,018 473,608
Loss on plugging and abandonment - -
Dry hole costs 124,882 -
Depreciation, depletion and amortization 3,213,959 4,201,758
Impairment expense 641,791 -
Accretion expense 424,422 392,634
Gain on revision of asset retirement obligations (303,633 ) -
Gain on purchase price adjustment (1,426,778 ) -
General and administrative 2,188,176 1,887,483
Severance taxes   1,994,025     1,205,934  
 
Total operating expenses   13,157,179     11,902,290  
 
Operating income 9,949,394 3,063,726
 
Other income (expense):
Commodity derivative expense, net - -
Interest income 11,857 78,317
Interest expense (4,327,773 ) (4,738,171 )
Financing expense (837,364 ) -
Gain on extinguishment of debt   -     -  
 
Total other expense   (5,153,280 )   (4,659,854 )
 
Net income (loss) before reorganization expenses and income taxes 4,796,114 (1,596,128 )
 
Reorganization expenses   61,678     148,954  
 
Net income (loss) before income taxes 4,734,436 (1,745,082 )
 
Income tax provision (benefit)   (6,747,749 )   (24,528 )
 
Net income (loss) $ 11,482,185   $ (1,720,554 )
 
Net income (loss) per share:
Basic $ 0.43   $ (0.10 )
Diluted $ 0.43   $ (0.10 )
 
Weighted average number of common shares outstanding:
Basic   26,446,516     17,174,957  
Diluted   26,946,456     17,174,957  
 
 

SARATOGA RESOURCES, INC. CONSOLIDATED STATEMENTS OF OPERATION
 
 

For the Year Ended December 31,
2011     2010
Revenues:
Oil and gas revenues $ 76,159,268 $ 52,734,207
Other revenues   4,774,882     2,284,008  
 
Total revenues 80,934,150 55,018,215
 
Operating (Income) Expense:
Lease operating expense 17,123,890 13,774,406
Workover expense 2,666,600 2,154,482
Exploration expense 596,065 1,921,943
Loss on plugging and abandonment 393,599 -
Dry hole costs 3,912,823 -
Depreciation, depletion and amortization 15,591,048 16,001,826
Impairment expense 641,791 -
Accretion expense 1,672,900 1,668,268
Gain on revision of asset retirement obligations (303,633 ) -
Gain on purchase price adjustment (1,426,778 ) -
Loss on settlement of accounts payable - 990,786
General and administrative 8,704,536 8,476,124
Severance taxes   6,090,666     5,214,677  
 
Total operating expenses   55,663,507     50,202,512  
 
Operating income 25,270,643 4,815,703
 
Other income (expense):
Commodity derivative expense, net - 696,550
Interest income 248,935 115,350
Interest expense (17,947,784 ) (22,584,934 )
Financing expense (837,364 ) -
Gain on extinguishment of debt   7,708,486     -  
 
Total other expense   (10,827,727 )   (21,773,034 )
 
Net income (loss) before reorganization expenses and income taxes 14,442,916 (16,957,331 )
 
Reorganization expenses   436,092     2,198,359  
 
Net income (loss) before income taxes 14,006,824 (19,155,690 )
 
Income tax provision (benefit)   (6,839,117 )   285,838  
 
Net income (loss) $ 20,845,941   $ (19,441,528 )
 
Net income (loss) per share:
Basic $ 0.95   $ (1.14 )
Diluted $ 0.93   $ (1.14 )
 
Weighted average number of common shares outstanding:
Basic   21,975,480     16,996,166  
Diluted   22,367,696     16,996,166  
 
 

SARATOGA RESOURCES, INC. CONSOLIDATED BALANCE SHEETS
 
  December 31,
2011   2010
ASSETS
Current assets:
Cash and cash equivalents $ 15,874,680 $ 4,409,984
Accounts receivable 10,539,757 9,039,836
Prepaid expenses and other 1,189,406 888,717
Deferred tax asset, net 1,400,000 -
Other current assets   150,000   300,000
Total current assets 29,153,843 14,638,537
 
Property and equipment:
Oil and gas properties - proved (successful efforts method) 196,101,827 170,870,775
Other   658,113   561,572
196,759,940 171,432,347
Less: Accumulated depreciation, depletion and amortization   (53,830,820)   (37,597,980)
Total property and equipment, net 142,929,120 133,834,367
 
Deferred tax asset, net 5,147,962 -
Other assets, net   20,531,218   2,870,379
Total assets $ 197,762,143 $ 151,343,283
 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 4,598,534 $ 4,655,874
Revenue and severance tax payable 5,709,773 5,071,508
Accrued liabilities 8,451,655 1,649,994
Short-term notes payable 344,256 285,298
Asset retirement obligation – current   1,548,945   332,863
Total current liabilities 20,653,163 11,995,537
 
Long-term liabilities
Asset retirement obligation 9,852,920 11,653,212
Long-term debt, net of discount of $2,115,195 and $4,140,662, respectively 125,384,805 131,200,209
Long-term debt – related parties   -   605,428
Total long-term liabilities 135,237,725 143,458,849
 
Commitment and contingencies (see notes)
 
Stockholders' equity (deficit):

Common stock, $0.001 par value; 100,000,000 shares authorized 26,714,815 and 17,298,598 shares issued and outstanding at December 31, 2011 and 2010, respectively

 
26,714 17,298
Additional paid-in capital 52,674,252 27,547,251
Retained earnings   (10,829,711)   (31,675,652)
 
Total stockholders' equity (deficit)   41,871,255   (4,111,103)
 
Total liabilities and stockholders' equity (deficit) $ 197,762,143 $ 151,343,283
 
 

SARATOGA RESOURCES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 

For the Year Ended December 31,
2011   2010
Cash flows from operating activities:
Net income (loss) $ 20,845,941 $ (19,441,528)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, depletion and amortization 15,591,048 16,001,826
Impairment expense 641,791 -
Accretion expense 1,672,900 1,668,268
Amortization of debt issuance costs 526,891 526,397
Amortization of debt discount 1,702,018 1,965,993
Commodity derivative (income) expense - (473,962)
Dry hole costs 3,912,823 -
Stock-based compensation 943,119 2,570,144
Loss on settlement of accounts payable - 990,785
Loss on plugging and abandonment 393,599 -
Gain on purchase price adjustment (1,426,778) -
Gain on revision of asset retirement obligations (303,633) -
Gain on extinguishment of debt (7,708,486) -
Deferred tax benefit (6,547,962) -
Changes in operating assets and liabilities:
Accounts receivable (1,499,920) (1,660,182)
Prepaids and other (150,688) 295,751
Deferred tax assets (6,547,962) -
Accounts payable (930,081) (11,556,869)
Revenue and severance tax payable 641,443 (841,880)
Payments to settle asset retirement obligations (1,148,655) (153,655)
Accrued liabilities   6,689,890   8,742,503
Net cash provided (used) by operating activities 33,845,260 (1,366,409)
 
Cash flows from investing activities:
Additions to oil and gas property (29,347,415) (9,417,471)
Additions to other property and equipment (96,541) (24,293)
Other assets   (1,028,048)   (767,381)
Net cash used by investing activities (30,472,004) (10,209,145)
 
Cash flows from financing activities:
Issuance of warrants - 100
Proceeds from issuance of common stock 14,813,298 -
Proceeds from short-term notes payable 1,649,068 1,260,276
Repayment of short-term notes payable (1,590,110) (1,389,234)
Repayment of debt borrowings (268,224) (5,500,000)
Repayment of debt borrowings - related party (736,633) -
Debt issuance costs of long term debt (5,775,959) -
Settlement of commodity hedges recorded in purchase accounting   -   38,913
Net cash provided (used) by financing activities   8,091,440   (5,589,945)
 
Net increase (decrease) in cash and cash equivalents 11,464,696 (17,165,499)
Cash and cash equivalents - beginning of period   4,409,984   21,575,483
Cash and cash equivalents - end of period $ 15,874,680 $ 4,409,984
 
Supplemental disclosures of cash flow information:
Cash paid for income taxes $ 130,000 $ 902,491
Cash paid for interest 8,210,196 10,537,405
Non-cash investing and financing activities:
Accounts payable for oil and gas additions $ 870,186 $ 181,933
Accrued liabilities for oil and gas additions 124,712 280,556
Revisions to asset retirement obligations 1,542,172 281,389
Asset retirement obligations acquired 67,728 -
Accrued interest converted to long-term debt - 30,811,843

Repayment of debt borrowing made directly to existing lender by new lender and from proceeds from issuance of common stock
(145,231,776) -
Proceeds from issuance of long-term debt paid directly to existing lender 125,231,775 -
Proceeds from issuance of common stock paid directly to existing lender 20,000,000 -
Debt issuance costs from issuance of warrants - 4,099,016
 

Non-GAAP Financial Measures

Discretionary Cash Flow is a non-GAAP financial measure.

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