SEC Company Response from BATTALION OIL CORP (BATL) (CIK 0001282648) (BATL) — Dec 15, 2009
BATTALION OIL CORP (BATL) (CIK 0001282648)
Date: Dec. 15, 2009 · CIK: 0001282648 · Accession: 0000950123-09-070942
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 000-50682
Letter
RAM Energy Resources, Inc.
Meridian Tower, Suite 650
5100 East Skelly Drive
Tulsa, Oklahoma 74135-6549
918.663.2800 FAX 918.663.9540
November 13, 2009
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549-4628
Attn: Ms. Jenifer Gallagher
Re:
RAM Energy Resources, Inc.
Form 10-K for the Fiscal Year Ended December 31, 2008
Filed March 12, 2009
Form 10-Q for the Fiscal Quarter Ended March 31, 2009
Filed May 7, 2009
Form 10-Q for the Fiscal Quarter Ended June 30, 2009
Filed August 6, 2009
Form 10-Q for the Fiscal Quarter Ended September 30, 2009
Filed November 5, 2009
SAB 99 Materiality Memo dated November 12, 2009
File No. 000-50682
This letter is in response to your phone call of November 5, 2009 requesting additional information. The additional information is summarized as follows:
1)
If the impairment were corrected at December 31, 2008, evaluate the effect of all errors on the income statement, including impairment, depreciation, depletion and amortization expense, tax provision, and net loss. Consider the effects at December 31, 2008, March 31, 2009, June 30, 2009, September 30, 2009 and forecasted December 31, 2009, both for current period and year-to-date.
2)
Evaluate the effect of all errors on total assets and stockholders’ equity (deficit) at December 31, 2008, March 31, 2009, June 30, 2009, and September 30, 2009.
3)
State whether debt covenant ratios or any other significant ratios disclosed by the company were affected.
Page 2 of 2
4)
Describe any further qualitative analysis that is appropriate.
The attached Materiality Analysis Memo contains responses to your questions.
We believe the impact on the financial statements and reserve information as of and for the periods ended December 31, 2008, March 31, 2009, June 30, 2009 and September 30, 2009 is immaterial and therefore restatements of the Form 10-K for the year ended December 31, 2008 and the Forms 10-Q for the periods ended March 31, 2009, June 30, 2009 and September 30, 2009 are not required. Please refer to the SAB 99 materiality memo for management’s analysis and discussion of the quantitative and qualitative factors impacting materiality which we are providing as supplemental information. The information set forth herein and in the attached SAB 99 materiality memo is furnished and not filed under the rules and regulations of the Securities Exchange Act of 1934, as amended.
The Company hereby acknowledges that:
•
the Company is responsible for the adequacy and accuracy of the disclosure in the filing;
•
staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and
•
the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
Very truly yours,
RAM Energy Resources, Inc.
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CORRESP
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RAM
Energy Resources, Inc.
Meridian Tower, Suite 650
5100 East Skelly Drive
Tulsa, Oklahoma 74135-6549
918.663.2800 FAX 918.663.9540
November 13, 2009
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549-4628
Attn: Ms. Jenifer Gallagher
Re:
RAM Energy Resources, Inc.
Form 10-K for the Fiscal Year Ended December 31, 2008
Filed March 12, 2009
Form 10-Q for the Fiscal Quarter Ended March 31, 2009
Filed May 7, 2009
Form 10-Q for the Fiscal Quarter Ended June 30, 2009
Filed August 6, 2009
Form 10-Q for the Fiscal Quarter Ended September 30, 2009
Filed November 5, 2009
SAB 99 Materiality Memo dated November 12, 2009
File No. 000-50682
This letter is in response to your phone call of November 5, 2009 requesting additional
information. The additional information is summarized as follows:
1)
If the impairment were corrected at December 31, 2008, evaluate the effect of
all errors on the income statement, including impairment, depreciation, depletion and
amortization expense, tax provision, and net loss. Consider the effects at December
31, 2008, March 31, 2009, June 30, 2009, September 30, 2009 and forecasted December 31,
2009, both for current period and year-to-date.
2)
Evaluate the effect of all errors on total assets and stockholders’ equity
(deficit) at December 31, 2008, March 31, 2009, June 30, 2009, and September 30, 2009.
3)
State whether debt covenant ratios or any other significant ratios disclosed by
the company were affected.
Page 2 of 2
4)
Describe any further qualitative analysis that is appropriate.
The attached Materiality Analysis Memo contains responses to your questions.
We believe the impact on the financial statements and reserve information as of and for
the periods ended December 31, 2008, March 31, 2009, June 30, 2009 and September 30, 2009 is
immaterial and therefore restatements of the Form 10-K for the year ended December 31, 2008
and the Forms 10-Q for the periods ended March 31, 2009, June 30, 2009 and September 30,
2009 are not required. Please refer to the SAB 99 materiality memo for management’s
analysis and discussion of the quantitative and qualitative factors impacting materiality
which we are providing as supplemental information. The information set forth herein and in
the attached SAB 99 materiality memo is furnished and not filed under the rules and
regulations of the Securities Exchange Act of 1934, as amended.
The Company hereby acknowledges that:
•
the Company is responsible for the adequacy and accuracy of the disclosure in
the filing;
•
staff comments or changes to disclosure in response to staff comments do not
foreclose the Commission from taking any action with respect to the filing; and
•
the Company may not assert staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities laws of the
United States.
Very truly yours,
RAM Energy Resources, Inc.
By
/s/
G. Les Austin
G. Les Austin,
Senior Vice President and Chief Financial Officer
RAM ENERGY RESOURCES, INC.
CONFIDENTIAL INTEROFFICE MEMORANDUM
TO:
FILES
FROM:
G. LES AUSTIN
SUBJECT:
RAM ENERGY RESOURCES, INC. SAB 99 ASSESSMENT OF MATERIALITY
RELATING TO ERROR IN RESERVE REPORTS
DATE:
NOVEMBER 13, 2009
CC:
The Company’s estimate of proved reserves for the year ended December 31, 2008 overstated
proved reserves by approximately 1.4 million barrels of oil equivalent (“BOE”) and understated the
future net revenues from proved oil and natural gas properties discounted at 10% (“PV 10”) by $10.7
million, resulting in an overstatement of impairment expense, depletion expense and tax benefit on
the Company’s financial statements. Additionally, the internal reserve report used to calculate the
March 31, 2009 impairment expense overstated reserves by approximately 2.7 million BOE and
understated the PV 10 by $21.0 million. The error in the proved reserve estimates was primarily
due to certain uneconomical properties not being excluded from the estimate of reserves. The
Company assessed the impact of the errors in the estimate of reserves on the financial statements
for the periods ended December 31, 2008, March 31, 2009, June 30, 2009, September 30, 2009 and
projected December 31, 2009 to determine if the impact was material and therefore whether a
restatement of the previously filed financial statements was required. The Company concluded the
financial statements for the periods analyzed did not materially misstate the reported results and
that a restatement of prior period financial statements was not required. The assessment of
materiality was provided to the Audit Committee of the Company’s Board of Directors for review and
the Audit Committee agreed with the conclusions reached by management. Additionally, the
materiality assessment was reviewed with the Company’s external auditors, UHY LLP, and the external
auditors agreed with the conclusions reached by management.
The assessment of materiality was prepared to consider both quantitative and qualitative
factors to determine if the magnitude of the overstatement of reserve quantities, overstatement of
impairment expense, overstatement of tax benefit, and changes in depletion expense was such that it
is probable that the judgment of a reasonable person relying upon the report would have been
changed or influenced by the correction of the item. Data included in the assessment of
materiality included the following:
Quantitative Assessment
As
Reported
Change
Corrected
% Change
Reserve report effect:
December 31, 2008
Proved reserves (MBoe)
36,196
(1,427
)
34,769
-3.9
%
Undiscounted cash flows ($ thousands)
623,411
12,849
636,260
2.1
%
PV-10 value ($ thousands)
311,385
10,746
322,131
3.5
%
March 31, 2009
Proved reserves (MBoe)
35,110
(2,705
)
32,405
-7.7
%
Undiscounted cash flows ($ thousands)
534,594
23,729
558,323
4.4
%
PV-10 value ($ thousands)
260,753
21,033
281,786
8.1
%
2
If restatements were made, the effect on total assets and stockholders’ equity (deficit)
for the periods analyzed would be as reflected in the table below:
RAM Energy Resources, Inc.
Consolidated Total Assets and Shareholders’ Equity
(in thousands)
(unaudited)
As Reported
Change
Corrected
% Change
December 31, 2008:
Total assets
$
395,845
$
8,119
$
403,964
2.1
%
Common stock
$
8
$
—
$
8
0.0
%
Additional paid-in capital
220,800
—
220,800
0.0
%
Treasury stock
(4,027
)
—
(4,027
)
0.0
%
Accumulated deficit
(167,060
)
8,119
(158,941
)
-4.9
%
Stockholders’ equity
$
49,721
$
8,119
$
57,840
16.3
%
March 31, 2009:
Total assets
$
363,218
$
16,854
$
380,072
4.6
%
Common stock
$
8
$
—
$
8
0.0
%
Additional paid-in capital
221,342
—
221,342
0.0
%
Treasury stock
(4,033
)
—
(4,033
)
0.0
%
Accumulated deficit
(205,153
)
16,854
(188,299
)
-8.2
%
Stockholders’ equity
$
12,164
$
16,854
$
29,018
138.6
%
June 30, 2009:
Total assets
$
323,101
$
15,375
$
338,476
4.8
%
Common stock
$
8
$
—
$
8
0.0
%
Additional paid-in capital
221,893
—
221,893
0.0
%
Treasury stock
(6,167
)
—
(6,167
)
0.0
%
Accumulated deficit
(216,959
)
15,375
(201,584
)
-7.1
%
Stockholders’ equity (deficit)
$
(1,225
)
$
15,375
$
14,150
-1255.1
%
September 30, 2009:
Total assets
$
309,320
$
14,973
$
324,293
4.8
%
Common stock
$
8
$
—
$
8
0.0
%
Additional paid-in capital
222,432
—
222,432
0.0
%
Treasury stock
(6,167
)
—
(6,167
)
0.0
%
Accumulated deficit
(219,676
)
14,973
(204,703
)
-6.8
%
Stockholders’ equity (deficit)
$
(3,403
)
$
14,973
$
11,570
-440.0
%
3
If restatements were made, the effect on income statements for the periods presented would be
as reflected in the tables below:
RAM Energy Resources, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share amounts)
(unaudited)
Year ended December 31, 2008
As Reported
Change
Corrected
% Change
REVENUES AND OTHER OPERATING INCOME:
Oil and natural gas sales
Oil
$
117,036
$
—
$
117,036
0.0
%
Natural gas
47,884
—
47,884
0.0
%
NGLs
17,770
—
17,770
0.0
%
Realized losses on derivatives
(10,472
)
—
(10,472
)
0.0
%
Unrealized gains on derivatives
33,257
—
33,257
0.0
%
Gain on sale of assets
10
—
10
0.0
%
Other
372
—
372
0.0
%
Total revenues and other operating income
205,857
—
205,857
0.0
%
OPERATING EXPENSES:
Oil and natural gas production taxes
10,480
—
10,480
0.0
%
Oil and natural gas production expenses
38,030
—
38,030
0.0
%
Depreciation and amortization
46,758
(246
)
46,512
-0.5
%
Accretion expense
2,207
—
2,207
0.0
%
Impairment
282,465
(12,579
)
269,886
-4.5
%
Share-based compensation
2,563
—
2,563
0.0
%
General and administrative, overhead and other expenses, net of
operator’s overhead fees
20,305
—
20,305
0.0
%
Total operating expenses
402,808
(12,825
)
389,983
-3.2
%
Operating loss
(196,951
)
12,825
(184,126
)
-6.5
%
OTHER INCOME (EXPENSE):
Interest expense
(24,182
)
—
(24,182
)
0.0
%
Interest income
208
—
208
0.0
%
Other expense
(13,536
)
—
(13,536
)
0.0
%
LOSS BEFORE INCOME TAXES
(234,461
)
12,825
(221,636
)
-5.5
%
INCOME TAX BENEFIT
(96,389
)
4,706
(91,683
)
-4.9
%
Net loss
$
(138,072
)
$
8,119
$
(129,953
)
-5.9
%
BASIC LOSS PER SHARE
$
(1.95
)
$
0.11
$
(1.84
)
-5.6
%
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING
70,629,452
—
70,629,452
0.0
%
DILUTED LOSS PER SHARE
$
(1.95
)
$
0.11
$
(1.84
)
-5.6
%
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING
70,629,452
—
70,629,452
0.0
%
4
RAM Energy Resources, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share amounts)
(unaudited)
Three months ended March 31, 2009
As Reported
Change
Corrected
% Change
REVENUES AND OTHER OPERATING INCOME:
Oil and natural gas sales
Oil
$
11,258
$
—
$
11,258
0.0
%
Natural gas
6,050
—
6,050
0.0
%
NGLs
1,748
—
1,748
0.0
%
Realized gains on derivatives
7,878
—
7,878
0.0
%
Unrealized losses on derivatives
(1,007
)
—
(1,007
)
0.0
%
Other
85
—
85
0.0
%
Total revenues and other operating income
26,012
—
26,012
0.0
%
OPERATING EXPENSES:
Oil and natural gas production taxes
872
—
872
0.0
%
Oil and natural gas production expenses
10,085
—
10,085
0.0
%
Depreciation and amortization
8,944
(662
)
8,282
-7.4
%
Accretion expense
404
—
404
0.0
%
Impairment
58,929
(11,316
)
47,613
-19.2
%
Share-based compensation
541
—
541
0.0
%
General and administrative, overhead and other expenses, net of
operator’s overhead fees
4,345
—
4,345
0.0
%
Total operating expenses
84,120
(11,978
)
72,142
-14.2
%
Operating loss
(58,108
)
11,978
(46,130
)
-20.6
%
OTHER INCOME (EXPENSE):
Interest expense
(3,608
)
—
(3,608
)
0.0
%
Interest income
20
—
20
0.0
%
Other expense
(433
)
—
(433
)
0.0
%
LOSS BEFORE INCOME TAXES
(62,129
)
11,978
(50,151
)
-19.3
%
INCOME TAX BENEFIT
(24,036
)
3,243
(20,793
)
-13.5
%
Net loss
$
(38,093
)
$
8,735
$
(29,358
)
-22.9
%
BASIC LOSS PER SHARE
$
(0.49
)
$
0.11
$
(0.38
)
-22.4
%
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING
77,290,832
—
77,290,832
0.0
%
DILUTED LOSS PER SHARE
$
(0.49
)
$
0.11
$
(0.38
)
-22.4
%
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING
77,290,832
—
77,290,832
0.0
%
5
RAM Energy Resources, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share amounts)
(unaudited)
Three months ended June 30, 2009
As Reported
Change
Corrected
% Change
REVENUES AND OTHER OPERATING INCOME:
Oil and natural gas sales
Oil
$
16,206
$
—
$
16,206
0.0
%
Natural gas
4,907
—
4,907
0.0
%
NGLs
2,387
—
2,387
0.0
%
Realized gains on derivatives
10,671
—
10,671
0.0
%
Unrealized losses on derivatives
(23,795
)
—
(23,795
)
0.0
%
Other
43
—
43
0.0
%
Total revenues and other operating income
10,419
—
10,419
0.0
%
OPERATING EXPENSES:
Oil and natural gas production taxes
927
—
927
0.0
%
Oil and natural gas production expenses
9,119
—
9,119
0.0
%
Depreciation and amortization
7,560
626
8,186
8.3
%
Accretion expense
532
—
532
0.0
%
Impairment
—
—
—
0.0
%
Share-based compensation
552
—
552
0.0
%
General and administrative, overhead and other expenses, net of
—
operator’s overhead fees
3,745
—
3,745
0.0
%
Total operating expenses
22,435
626
23,061
2.8
%
Operating loss
(12,016
)
(626
)
(12,642
)
5.2
%
OTHER INCOME (EXPENSE):
Interest expense
(3,601
)
—
(3,601
)
0.0
%
Interest i