On October 13, 2011, Cano Petroleum, Inc. (NYSE Amex: CFW)
(“Cano”) announced that it is unable to file its annual report on
Form 10-K for the year ended June 30, 2011 within the 15 day
extended period afforded to it pursuant to the Notification of Late
Filing on Form 12b-25 that Cano filed with the Securities and
Exchange Commission on September 29, 2011. Cano is delayed in
filing its annual report because revisions to its estimated proved
reserves, along with the associated impairment and tax
consequences, require additional time for Cano to prepare and
review the filing.
Cano anticipates that it will file its Form 10-K on or before
Wednesday, October 19, 2011.
Cano anticipates, on an unaudited basis, to incur a loss from
continuing operations before income taxes of approximately $204.6
million for the year ended June 30, 2011 compared to a loss
from continuing operations before income taxes of $20.1 million for
the year ended June 30, 2010. The significant change results
primarily from an impairment of estimated proved reserves of
approximately $172.9 million, which the Company anticipates
recording upon the completion of its review of the financial
statements.
Proved Undeveloped Reserves and Proved Developed
Non-Producing Reserves
The Company anticipates reporting that as of June 30, 2011,
it does not have reportable estimated proved undeveloped reserves
or estimated proved developed non-producing reserves. This is a
decrease of approximately 34.2 million barrels of oil equivalent
from the estimated proved undeveloped reserves and a decrease of
approximately 2.3 million barrels of oil equivalent from estimated
proved developed non-producing reserves reported by the Company as
of June 30, 2010.
These decreases primarily are the result of the application of
the requirements of the SEC’s amended Rule 4-10 of Regulation
S-X. Among other things, guidance for Rule 4-10 of Regulation
S-X for the reporting of estimated proved undeveloped reserves
requires that a company must have adopted a development plan and
have made a final investment decision for the development of such
reserves. The mere intent to develop is not sufficient for
reporting estimated proved undeveloped reserves. For all reserves,
Rule 4-10 of Regulation S-X requires that there must exist, or
there must be a reasonable expectation that there will exist, the
financing required to implement the development projects. Due to
the Company’s current financial constraints, including continued
losses, defaults under its loan agreements and Series D Preferred
Stock agreement, no available borrowing capacity, constrained cash
flow, negative working capital, and limited to no other capital
availability, the Company does not have a reasonable expectation
that it can obtain the financing required to implement these
projects within a reasonable time, even though the Company believes
these projects, in and of themselves, remain technically feasible
and economically attractive. Therefore, the Company anticipates
recording the aforementioned impairment to its reserves.
Proved Developed Producing Reserves
The Company expects to report estimated proved developed
producing reserves as of June 30, 2011 of
approximately 4.3 million barrels of oil equivalent, a
decrease of approximately 1.7 million barrels of oil equivalent
from the 6.0 million barrels of oil equivalent reported by the
Company as of June 30, 2010. This anticipated reduction
primarily results from production of approximately 0.3 million
barrels of oil equivalent for the year ended June 30, 2011 and
an estimated reserve reduction of approximately 1.4 million barrels
of oil equivalent due to reserve revisions that the Company
believes will be principally the result of lower rates of
production performance than previously forecast in the Company’s
reserve report dated June 30, 2010.
Summary Results of Operations (UNAUDITED)
The following table summarizes the Company’s current estimates
of key items of comparison and their related increase (decrease)
for the fiscal years ended June 30, 2011 and 2010.
Years Ended June 30, Increase (in
thousands)
2011 2010 (Decrease)
Oil and gas sales $ 26,127 $ 22,849 $ 3,278 Production expenses:
Lease operating 12,725 20,744 (8,019 ) Taxes other than income
2,069 1,856 213 General and administrative: General and
administrative 7,338 10,775 (3,437 ) Stock-based compensation (579
) 1,043 (1,622 ) Depletion & Depreciation 19,849 4,978 14,871
Accretion 338 287 51 Impairment 172,890 283 172,607 Interest
expense and other 16,089 2,941 13,148
Loss from Continuing
Operations (204,591 ) (20,058 )
(184,533 ) Deferred tax benefit 18,975 6,462 12,513
Income from discontinued operations 0 2,057 (2,057 ) Preferred
stock dividend (3,145 ) (1,829 ) (1,316 )
Net income (loss)
$ (188,761 ) $ (13,368 )
$ (175,393 )
Total Assets $ 65,437 $
259,388 $ (193,951 ) Total
Liabilities $ 118,717 $ 96,805
$ 21,912 Temporary Equity: Series D convertible
preferred stock 0 26,518 (26,518 )
Stockholders’ Equity (Deficit) $
(53,280 ) $ 136,065
$ (189,345 )
About Cano
Cano Petroleum, Inc. is an independent Texas-based energy
producer with properties in the mid-continent region of the United
States. Cano’s primary focus is on increasing domestic production
from proven fields using enhanced recovery methods. Cano trades on
the NYSE Amex under the ticker symbol CFW. Additional information
is available at www.canopetro.com.
Forward Looking Statements
Safe-Harbor Statement — Except for the historical information
contained herein, the matters set forth in this news release are
“forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Cano intends that all
such statements be subject to the “safe-harbor” provisions of those
Acts. Many important risks, factors and conditions may cause Cano’s
actual results to differ materially from those discussed in any
such forward-looking statement. These risks include, but are not
limited to, estimates or forecasts of reserves, estimates or
forecasts of production, future commodity prices, exchange rates,
interest rates, geological and political risks, drilling risks,
product demand, transportation restrictions, the ability of Cano
Petroleum, Inc. to obtain additional capital, and other risks and
uncertainties described in the Cano’s filings with the Securities
and Exchange Commission. The historical results achieved by Cano
are not necessarily indicative of its future prospects. Cano
undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
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