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WRES > SEC Filings for WRES > Form 8-K on 30-May-2013All Recent SEC Filings

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Regulation FD Disclosure, Financial Statements and Exhibits

Item 7.01. Regulation FD Disclosure.

On May 30, 2013, Warren Resources, Inc. ("Warren") issued a press release announcing the commencement of a private offering to eligible purchasers, subject to market and other conditions, of $200,000,000 in aggregate principal amount of a new series of senior notes due 2021 (the "Notes"). A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

The offer and sale of the Notes will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), or the securities laws of any state, and the Notes may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements under the Securities Act and applicable state securities laws. The Notes may be resold by the initial purchasers pursuant to Rule 144A and Regulation S under the Securities Act. The information contained in this Current Report on Form 8-K, including Exhibit 99.1, is neither an offer to sell nor a solicitation of an offer to buy any of the Notes in the offering or any other securities of Warren.

In connection with the commencement of the private offering of the Notes, we are providing updated disclosures with respect to us, our core operating areas, our other financial data, our reconciliation of net income to EBITDA and Adjusted EBITDA, our production volumes, sales prices and production costs and recent developments contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012 and our quarterly report on Form 10-Q for the period ending March 31, 2013.

The information in this Item 7.01 includes "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act concerning Warren's operations, economic performance and financial condition. These forward-looking statements include information concerning future production and reserves, schedules, plans, timing of development, contributions from oil and gas properties, and those statements preceded by, followed by or that otherwise include the words "believes," "expects," "anticipates," "intends," "estimates," "projects," "target," "goal," "plans," "objective," "should" or similar expressions or variations on such expressions. For such statements, Warren claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Although Warren believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from Warren's expectations include, but are not limited to, Warren's assumptions about energy markets, production levels, reserve levels, operating results, competitive conditions, technology, the availability of capital resources, capital expenditures and other contractual obligations, the supply and demand for and the price of oil, natural gas and other products or services, the weather, inflation, the availability of goods and services, drilling risks, future processing volumes and pipeline throughput, general economic conditions, either internationally or nationally or in the jurisdictions in which Warren or its subsidiaries are doing business, legislative or regulatory changes, including changes in environmental regulation, environmental risks and liability under federal, state and local environmental laws and regulations, potential environmental obligations, the securities or capital markets, our ability to repay debt and other factors. Warren undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, subsequent events or otherwise, unless otherwise required by law.

(i) Warren Resources, Inc.

We are an independent energy company engaged in the exploration, development, production and acquisition of domestic oil and natural gas properties. Our development and production activities are currently focused on two geographic areas: the Los Angeles Basin in California and the Greater Green

River Basin in Wyoming. In California, we produce oil from the northern section of the Wilmington field, which is the third largest oilfield in the United States. In Wyoming, we produce natural gas from the Atlantic Rim area of the Washakie basin (the "Atlantic Rim Project"). We focus on increasing reserves and production from these properties while reducing costs of operations.

In California, we produce oil using directional and horizontal drilling in combination with waterflood recovery techniques, and in Wyoming, we produce coalbed methane ("CBM") gas utilizing shallow vertical drilling. As of December 31, 2012, we had estimated net proved reserves of 24.9 MMBoe, with a standardized measure of discounted future net cash flows ("Standardized Measure") of $459.9 million, and a PV-10 Value of $494.9 million, which consisted primarily of 16.4 MMBbls of oil from our California properties and
51.2 Bcfe of natural gas, primarily from our Wyoming properties. For the three months ended March 31, 2013, our average daily production was approximately 11,210 barrels of oil equivalent per day ("Boe/d") gross (5,700 Boe/d net), which consisted of approximately 3,516 gross (2,850 net) Boe/d of oil from California and approximately 7,694 gross (2,850 net) Boe/d of natural gas, primarily from Wyoming. We recently increased our 2013 capital expenditure budget by $15 million to $73 million.

The following table summarizes our estimated proved reserves as well as certain operating information for each of our core operating areas as of the date and for the period presented.

                                                                               Three Months
                                  At December 31, 2012                        March 31, 2013
                                                  Estimated      Proved
               Estimated      PV-10 Value of       Proved       Developed
                Proved          Estimated         Reserves      Producing     Average Daily
               Reserves      Proved Reserves      Operated      Reserves      Net Production
                (MMBoe)      (in millions)(a)        (%)         (MMBoe)         (Boe/d)
 California          16.4     $          475.8          100%           7.9              2,850
 Wyoming              8.2                 18.0           94%           4.2              2,645
 Other(b)             0.3                  1.1            0%           0.1                205

 Total               24.9     $          494.9           98%          12.2              5,700

The PV-10 Value represents the future net cash flows attributable to our proved oil and natural gas reserves before income tax, discounted at 10% per annum. Although it is a non-GAAP measure, we believe that the presentation of the PV-10 Value is relevant and useful to our investors because it presents the discounted future net cash flows attributable to our proved reserves prior to taking into account future corporate income taxes and our current tax structure. We use this measure when assessing the potential return on investment related to our oil and natural gas properties. Our reconciliation of this non-GAAP financial measure is shown below as the PV-10 Value, less future income taxes, discounted at 10% per annum, resulting in the Standardized Measure. The Standardized Measure represents the present value of future cash flows attributable to our proved oil and natural gas reserves after income tax, discounted at 10%.

             PV-10 Value ($ in thousands)                     494,914
             Less: future income taxes, discounted at 10%      35,033

             Standardized Measure ($ in thousands)          $ 459,881

PV-10 Value, however, is not a substitute for the Standardized Measure. Our PV-10 Value and the Standardized Measure do not purport to present the fair value of our oil and natural gas reserves.

Includes conventional oil and natural gas properties located primarily in New Mexico and Texas.

Core Operating Areas

California. Our California operations consist of the Wilmington Townlot Unit (the "WTU") and the North Wilmington Unit (the "NWU") in the Wilmington field of the Los Angeles Basin of California. The Wilmington field has produced over 2.5 billion barrels of oil since its discovery in the 1930s. We have budgeted $53 million for drilling and facilities in California for 2013, with 23 wells planned.

Wilmington Townlot Unit. The WTU is located in the northern part of the Wilmington field. The WTU is a unitized oil field consisting of 1,440 gross (1,424 net) acres and has produced more than 149 million barrels of oil from primary and secondary production. As of March 31, 2013, we held an approximate 98.9% working interest and an approximate 81.0% net revenue interest in the WTU.

During March 2013, we averaged 3,147 barrels of oil per day ("Bbls/d") gross (2,550 Bbls/d net) production in the WTU. As of December 31, 2012, there were 118 gross (117 net) producing wells in the WTU. In addition, estimated proved reserves as of December 31, 2012 were 15.3 MMBbls gross (12.4 MMBbls net), of which approximately 55% were proved developed producing ("PDP"), 1% were proved developed non-producing ("PDNP"), and 44% were proved undeveloped ("PUD").

North Wilmington Unit. The NWU is located in the Wilmington field adjacent to the east of the WTU. The NWU is a unitized oil field consisting of approximately 1,036 gross and net acres. As of March 31, 2013, we held a 100% working interest and an approximate 84.7% net revenue interest in the NWU.

During March 2013, we averaged 349 Bbls/d gross (295 Bbls/d net) production in the NWU. As of December 31, 2012, there were 26 gross (26 net) producing wells in the NWU. In addition, estimated proved reserves as of December 31, 2012 were 4.7 MMBbls gross (4.0 MMBbls net), of which approximately 27% were PDP, none were PDNP, and 73% were PUD.

Wyoming. The Washakie Basin is located in the southeast portion of the Greater Green River Basin in southwestern Wyoming. We are focusing our CBM drilling in the Atlantic Rim Project. We also have the rights to drill and develop the deeper, conventional formations ("deep rights") in some, but not all, of the acreage in the Atlantic Rim area. We have budgeted $20 million for drilling and facilities expenditures in Wyoming for 2013, with 25 wells planned.

CBM. Commercial CBM production in the Washakie Basin was initially established in 2002 on the eastern rim of the Washakie Basin by us and another independent energy company. Current development in the Washakie Basin is targeting shallow Mesa Verde coalbeds.

The Washakie Basin represents our largest acreage position. As of December 31, 2012, we owned 114,737 gross (89,013 net) acres prospective for CBM development in the Washakie Basin, of which 75,841 net acres were undeveloped. This area contains approximately 150 gross identified drilling locations, primarily on 80-acre well spacing, and over 60 well stimulation opportunities. As of December 31, 2012, the estimated proved developed reserves for the 144 CBM wells drilled and producing in this area in this basin were 92 Bcf gross (49.4 Bcf net) on 80-acre well spacing.

Our Atlantic Rim Project comprises approximately 113,275 gross (87,746 net) acres on the eastern rim of the Washakie Basin. The Pacific Rim area of the Washakie Basin (the "Pacific Rim Project") comprises approximately 1,462 gross acres (1,267 net acres) on the western rim of the Washakie Basin, in which we are not currently developing.

Deep Rights. In addition, we own approximately 90,124 gross (71,791 net) undeveloped acres of deep rights below our CBM formations in the Atlantic Rim area. The deep acreage is potentially prospective for hydrocarbon production from the Niobrara Shale and other deep formations. The

acreage is primarily located in the southern portion of the eastern Washakie Basin in Wyoming and is adjacent to and north of the Colorado border.

We are currently considering possibilities for developing the Niobrara Shale and other deep formations, including joint ventures, cooperative development agreements and joint participation agreements. We estimate that the Niobrara Shale formation is at depths between 4,000 and 10,000 feet. Successful Niobrara Shale oil wells that have been developed in southern Wyoming and northern Colorado are typically drilled horizontally, or vertically, with multiple-stage fracturing.

Our initial pod, the Sun Dog sub-area, commenced production in April 2002. Currently the Sun Dog sub-area consists of 113 wells. During March 2013, production from 110 producing wells averaged approximately 13,290 gross (7,460 net) Mcf/d of gas. Based on a report from Netherland, Sewell & Associates, Inc. as of December 31, 2012, estimated proved developed reserves for the wells in the Sun Dog sub-area 43.4 Bcf gross (24.4 net) Bcf. We currently own a working interest of approximately 67% in the wells drilled in . . .

Item 9.01. Financial Statements and Exhibits.

Exhibit No. Document
99.1 Press Release of Warren Resources, Inc. dated May 30, 2013.

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