RAME Ram Energy Resources, Inc. (MM)

RAM Energy Resources, Inc. (Nasdaq: RAME) today announced its preliminary 2011 non-acquisition capital budget totaling $35 million. Consistent with RAM’s historical strategy, non-acquisition capital expenditures are targeted to be within estimated annual cash flow. Key assumptions supporting the 2011 capital expenditure budget are:

  a.   Hydrocarbon prices equal to the calendar 2011 NYMEX strip prices prevailing at year-end 2010 of $93.68 per barrel for oil and $4.64 per Mcf for natural gas; b. Estimated production mix of 66% oil and natural gas liquids (NGLs) and 34% natural gas; c. Estimated production of 1.7 – 1.8 million barrel of oil equivalents (BOE), principally reflecting the absence for the entire 2011 year the volumes associated with two asset sales which closed in December 2010. First quarter 2011 production forecast in the range of 400 – 420 thousand BOE, anticipates some winter weather interruption similar to last year based on weather patterns to date, but volumes are expected to increase in following quarters coincident with capital expenditures; d. Production and pricing assumptions combine to produce modified EBITDA (a non-GAAP measure) within a range of $52 - $55 million; e. Interest expense within a range of $14 - $15 million, approximately 36% lower than the preliminary estimate of interest expense incurred in 2010.

Approximately $18 million or 51% of the 2011 budget targets development and exploitation drilling along with recompletions from the company’s mature and developing fields aimed at offsetting natural declines and increasing production in the near term. An additional $9 million, or 26%, is allocated to exploratory activities for a total of $27 million, or 77%, of the budget dedicated to replacing or growing production through the drillbit. The remaining $8 million, or 23%, is allocated to capitalized geological and geophysical expenditures (G&G), land and seismic costs, with the objective of identifying new drilling opportunities for 2011 and beyond. In 2011, RAM expects to attain similar modified EBITDA and capital expenditure levels compared to those experienced in 2010 as a result of a higher anticipated price for oil and NGLs. These results are anticipated to occur despite the forecast for lower production in 2011 compared to 2010, which is principally a function of asset sales.

Balance Sheet and Liquidity Improvement with Asset Sales

As a result of the application of sale proceeds from two property sales in December 2010 and the resulting voluntary prepayment on RAM’s term loan, the total amount outstanding under RAM’s senior secured credit facility was reduced to $196.7 million at December 31, 2010. The year-end 2010 bank debt is 20% lower than the $245 million outstanding at the initiation of the company’s mid-year strategic review process. The company has reduced debt by a total of $139 million, or 41%, from the level of $336 million at year-end 2007, coincident with the closing of its last major acquisition. The borrowing base under RAM’s revolving credit facility at year-end 2010, after adjusting for the collateral value of the properties sold, was $145 million. Resulting liquidity of $28.5 million represents an improvement of $11.5 million over the company’s effective liquidity at June 30, 2010 and demonstrates additional financial flexibility to fund future growth. A further benefit from the asset sales and use of proceeds, RAM expects interest expense in 2011 to drop by $7.5 to $8.5 million compared to its preliminary estimate of interest expense in 2010.

“We are pleased to have executed two divestitures by year-end 2010, improving both our balance sheet and our liquidity compared to those levels existing at the initiation of the company’s strategic alternatives review in mid-2010. As a consequence of the reduction of debt, the improvement in liquidity, our oily production mix, the outlook for a continued high price for oil in 2011 and our sizable Osage exploration concession, we are well positioned for growth in the coming year,” said Larry Lee, CEO of RAM.

Advantaged Revenue Stream

In addition to an improved balance sheet and liquidity, RAM’s mix of production also improved as a result of the property sales in the fourth quarter and establishes a benchmark for the production mix in 2011. The proportion of crude and NGLs as a percent of total BOE produced rose to 66% in the month of December 2010 (exclusive of volumes attributable to assets sold) compared to the level of 63% registered in the third quarter ended September, 30, 2010. Similarly, based on RAM’s preliminary estimate of proved reserves at year-end 2010, oil and NGLs accounted for 62 percent of total proved reserves.

Stepped up Pace of Drilling Planned in Osage Mississippian Exploration Play

During 2010, the company drilled three wells on its 56,320 acre concession in Osage County, Oklahoma, a part of the broad Mississippian Chat / Lime / Arbuckle oil play in the region. During the first quarter 2011, the company plans to drill a saltwater disposal well, the Surber #3/ SWD, on concession acreage to service existing and future producing wells. Also in the first quarter, RAM is preparing to drill the Farmland #1, a well targeting the Mississippi Chat formation. The Rickets #1, which was drilled to the Mississippi Chat formation late in 2010 and the Surber #1 well are both scheduled for additional testing, including fracturing and stimulation in the first quarter 2011, coincident with the availability of the completed salt water disposal well. Three additional wells are scheduled to be drilled during the second quarter of 2011. Four well locations have been identified for drilling in the third quarter and three more wells are planned in the fourth quarter of 2011 based on results of the second phase of seismic acquisition. Interpretation of the first phase of 3-D, acquired in 2010, indicated that as much as one-third of the acreage surveyed could be prospective. In turn, this supported the rationale to test a large part of the initial survey and ultimately led to the diverse choice of locations for the initial wells drilled in this play during 2010 and those planned for 2011. Permitting is underway to acquire a second round of 3-D seismic and the company has contracted with a vendor to begin acquisition during the first quarter of 2011. This second phase of 3-D seismic acquisition is planned to cover over 19,000 acres in the company’s Osage concession and is anticipated to add additional drilling prospects principally for 2012 and beyond when interpreted.

Forward-Looking Statements

This release includes certain statements that may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements in this release, other than statements of historical facts, that address the company’s pursuit of strategic alternatives, assumed NYMEX strip prices for oil and natural gas, anticipated capital spending, planned drilling, targets for production, the company’s production mix, modified EBITDA and interest as well as events or developments that the company expects or believes are forward-looking statements. Although the company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include oil and gas prices, issues arising in conjunction with the debt refinancing process, actions taken and to be taken by the government as a result of political and economic conditions, continued availability of capital and financing, and general economic, market or business conditions as well as other risk factors described from time to time in the company’s filings with the SEC. The company assumes no obligation to update publicly such forward-looking statements, whether as a result of new information, future events or otherwise.

About RAM Energy Resources

RAM Energy Resources, Inc. is an independent energy company engaged in the acquisition, exploitation, exploration, and development of oil and gas properties and the marketing of crude oil and natural gas. Company headquarters are in Tulsa, Oklahoma, and its common shares are traded on the Nasdaq under the symbol RAME. For additional information, visit the company website at www.ramenergy.com.