BATL

SEC Filing Summary: RAM Energy Resources, Inc. (10-K)

Business Context and Reporting Period

Company: RAM Energy Resources, Inc. (formerly Tremisis Energy Acquisition Corporation)
Reporting Period: Fiscal year ended December 31, 2007
Industry: Independent oil and natural gas exploration, development, and production.
Operations: Primarily in Texas, Louisiana, Oklahoma, and West Virginia. The company operates in conventional basins and unconventional shale plays (Barnett, Devonian, Woodford, Caney).
Key Event: On November 29, 2007, the company completed the acquisition of Ascent Energy Inc. for approximately $304 million in total consideration (cash, stock, and warrants), significantly expanding its reserve base and acreage.

Key Financial Metrics (Year Ended Dec 31, 2007)

Note: 2007 results include Ascent Energy operations for only one month (Nov 29 - Dec 31).

Material Changes vs. Prior Period

• Revenue Composition: While oil and gas sales increased 20% due to higher production volumes (10% increase) and prices (9% increase), total revenue decreased slightly due to a $12.7 million unrealized loss on derivative contracts, compared to a $1.6 million gain in 2006.
• Profitability: The company reported a net loss of $1.3 million in 2007, reversing the $5.0 million net income from 2006. This was driven by derivative losses, increased amortization/depreciation ($18.9M vs $13.3M), and higher interest expense ($20.8M vs $17.1M).
• Balance Sheet: Total assets nearly quadrupled to $580.2 million, and total debt increased to $335.7 million, primarily due to the Ascent acquisition and the refinancing of debt to fund the transaction.
• Reserves: Proved reserves more than doubled to 39.4 MMBoe, with the PV-10 value increasing to $911.5 million, reflecting the Ascent acquisition and higher year-end commodity prices ($93.90/bbl oil, $7.00/Mcf gas).

Guidance, Outlook, and Risks

Management Outlook:

• 2008 Capital Budget: Budgeted $80.0 million for non-acquisition capital expenditures, focusing on development drilling ($71.5M) and exploration ($3.5M).
• Development Plans: Plans to accelerate drilling in the Appalachian Devonian Shale (14 wells) and North Texas Barnett Shale (4-7 wells).
• Liquidity: Management believes available credit facility capacity ($68.6M at year-end), cash, and operating cash flows are sufficient for 2008 obligations.

Risks and Contingencies:

• Commodity Price Volatility: Profitability is highly sensitive to oil and gas prices. The company utilizes derivative contracts (collars, floors) to manage risk, which resulted in significant unrealized losses in 2007.
• Debt Covenants: The new $500M credit facility requires maintaining commodity hedges on 50-85% of projected production until the leverage ratio is below 2.0:1.
• Legal Proceedings: The company is a defendant in a pending class action suit (Sacket v. Great Plains Pipeline Company) alleging underpayment of royalties. Damages are unspecified, but 3.2 million shares are held in escrow to secure indemnity obligations.
• Asset Retirement Obligations: Significant liabilities exist for plugging and abandoning wells, totaling $27.6 million at year-end.

Investor Verification Checklist

• Derivative Exposure: Verify the impact of unrealized derivative losses on future earnings and the specific terms of the hedging program required by the credit facility.
• Debt Maturity: Confirm the repayment of the $28.4 million senior notes due February 2008 (noted as retired in Feb 2008 using credit facility proceeds) and the terms of the new $500M facility.
• Acquisition Integration: Assess the integration of Ascent Energy's operations and the realization of the projected reserve additions and production growth.
• Legal Liability: Monitor the status of the Sacket class action lawsuit and potential financial exposure.
• Reserve Estimates: Review the independent reserve reports (Williamson Petroleum Consultants and Forrest A. Garb & Associates) validating the 39.4 MMBoe proved reserve figure.