EPiC Energy Resources Announces First Quarter Results

HOUSTON, May 20 /PRNewswire-FirstCall/ -- EPiC Energy Resources, Inc. (BULLETIN BOARD: EPCC) ("EPiC") a provider of engineering & consulting services to the energy industry, today announced its 2008 first quarter results. Since its inception, EPiC has been acquisition-focused, and in August 2007 acquired The Carnrite Group, LLC ("Carnrite"), a management consulting company focused on providing strategic and operational consulting services to the broad energy industry and in December 2007, acquired Pearl Investment Company ("Pearl"), a diversified engineering and energy services company.

First Quarter Highlights:
-- On February 20, 2008, EPiC completed the acquisition of a global
training company called Epic Integrated Solutions, LLC ("EIS") in a
stock and cash transaction valued at $3.1 million. The acquisition is
anticipated to be accretive to earnings in 2008. During the twelve
months ending 2007, EIS generated approximately $2.9 million in revenue
with net income of $699,000.
-- As of April 30, 2008, Epic's backlog for engineering and consulting
services to be provided in the future was approximately $43.5 million
compared with a backlog of approximately $23.9 million as of
February 29, 2008.

First Quarter Results:

During the first quarter ending March 31, 2008, EPiC generated total revenues of $17.5 million and a net loss of $1.3 million, or $0.03 per share, compared to fourth quarter 2007 revenue of $6.8 million and a net loss of $2.1 million, or $0.11 per diluted share. The growth in revenue was due to the acquisitions of Pearl, which was completed on December 5, 2007, and EIS, which closed on February 20, 2008. Contributing to the net loss in the 2008 period were unexpected additional expenses recorded for a fixed fee contract, one time costs associated with the Pearl and EIS acquisitions, and a general increase in costs to facilitate the integration of Carnrite, Pearl, and EIS.

The first quarter 2008 results included non-cash expenses of $1.5 million and other one-time expenses of $718,000. Excluding these items, 2008 first quarter net income would have been $945,000 or $0.02 per diluted share. Net cash flows provided by operating activities for the three months ended March 31, 2008 was $3.7 million and income from operations was $113,000.

Prior to the aforementioned acquisitions, in the first quarter 2007 EPiC generated revenue of $76,000 and a net loss of $452,000, or $0.01 per share. Basic and fully-diluted weighted average shares of common stock outstanding in the first quarter of 2008 decreased 18% to 43.3 million shares from 52.7 million shares in the first quarter of 2007, primarily due to the surrender of 23.2 million shares of common stock in March 2007 by certain senior company officers.

"We continue to integrate and grow our organization as exemplified by the sequential increase in revenue we generated during the first quarter compared to the fourth quarter of 2007," said Rex P. Doyle, EPiC's Chief Executive Officer. "Our Engineering and Consulting business unit turned-in strong revenue and operating profit in a quarter that had all the possible distraction from integration and consolidation activities. We are excited that our backlog for engineering and consulting services continues to rise, reflecting not only the strength of the industry, but also our expanding blueprint of best-in-class service offerings. We recognize that the integration of three acquisitions along with a substantial fixed fee contract signed in early 2007 have negatively impacted our first quarter results, however, we are aggressively pursuing expense controls, and addressing project management and project control processes. We continue to explore opportunities to further develop our relationships with our customers and to make progress on cross selling our consulting services."

Segment Information

Segment Reporting
Q1 2008
Engineering Oil and Gas
Consulting Production* Totals
(unaudited) (unaudited) (unaudited)
Revenue $17,473,868 $- $17,473,868
Operating Expense 15,756,146 1,604,612 17,360,758
Operating Income 1,717,722 (1,604,612) 113,110
Other Inc/Exp 110,764 1,264,468 1,375,232
Net Income $1,606,958 $(2,869,080) $(1,262,122)

* The oil and gas operating expenses include general and administrative,
compensation, occupancy, professional services and communication
expenses related to Epic headquarters.

Engineering Consulting Segment

The engineering and consulting segment is made up of the contributions from Carnrite, Pearl and EIS, which was acquired on February 20, 2008. This segment generated revenue of $17.5 million, which included $11.0 million in revenue from consulting fees and $6.5 million of reimbursed expenses. Segment operating profit of $1.7 million, included a net contribution from reimbursed expenses of approximately $672,000 in the first quarter of 2008. Segment operating margins were 9.2% in the first quarter.

The operating income for this segment was less than expected due to a slower start than anticipated for engineering and operations contracts in the Rockies area primarily related to adverse weather conditions early in the quarter and a general delay in customers' project schedules. A second, significant negative impact was due to substantial cost overruns on a fixed fee project initiated in the first quarter of 2007 and scheduled to be complete by the end of 2007. Due to scope changes and execution issues, approximately 12,000 additional, unbilled man-hours have been spent in the first four months of 2008 in an attempt to complete this project. It is expected that the majority of the costs related to this project have been expended.

Oil and Gas Production Segment

During the first quarter of 2008, production from our oil and gas properties in Kansas and Oklahoma remained shut-in. However, gas production from our Kansas wells is expected to resume early in the second half of 2008 upon the completion of Nitrogen Rejection Units (NRU) to harvest the helium from the field. The property in Kansas contains helium reserves estimated at between 1% and 2% of the proved gas reserves of the property. A third party has been contracted to build, install and operate the NRU. Capital costs to build, install and operate the NRU units will be the responsibility of the third party company in exchange for a percentage of the produced natural gas and helium.

Epic is currently looking at strategic alternatives for the properties owned in both Kansas and Oklahoma.

About EPiC

EPiC Energy Resources is an integrated energy company based in The Woodlands, Texas. EPiC is focused on providing both energy engineering & consulting services along with acquiring, developing and optimizing energy assets. EPiC is headquartered at 10655 Six Pines Drive, Suite 210, The Woodlands, Texas 77380. Office -- 281-419-3742, http://www.1epic.com/.

Forward Looking Statements

Certain statements included in this release constitute forward-looking statements. These forward-looking statements are based on management's belief and assumptions derived from currently available information. Although EPiC Energy Resources ("EPiC") believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Actual results could differ materially from forward-looking statements expressed or implied herein as a result of a variety of factors including, but not limited to: a decline in the price of, or demand for, oil and gas, demand for EPiC's services, loss or unavailability of key personnel, inability to recruit or retain personnel, competition for customers and contracts, various potential losses associated with fixed-price contracts, general economic conditions; and other financial, operational and legal risks and uncertainties detailed from time to time in EPiC's SEC filings. EPiC does not undertake any obligation to publicly update forward looking statements contained herein to reflect subsequent events or circumstances.

-Tables to Follow-

EPIC ENERGY RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

Three Months Ended March 31,
2008 2007
REVENUES
Consulting fees $11,006,850 $74,842
Reimbursed expenses 6,467,018 - Oil and gas revenue - 742
TOTAL REVENUES 17,473,868 75,584

OPERATING EXPENSES
General and administrative 2,849,465 427,642
Lease operating expenses 60,206 64,303
Professional and subcontracted
services 1,706,905 - Compensation and benefits 6,122,179 - Reimbursed expenses 5,795,394 - Occupancy, communication and other 346,608 - Depreciation, depletion and
amortization 467,852 - Accretion expense 2,151 5,369
OPERATING EXPENSES 17,360,760 497,314

INCOME (LOSS) FROM OPERATIONS 113,108 (421,730)
OTHER INCOME (EXPENSE)
Interest and other income 24,740 2,103
Interest expense (1,399,972) (32,077)
OTHER INCOME (EXPENSE) (1,375,232) (29,974)

NET LOSS $(1,262,124) $(451,704)

LOSS PER COMMON SHARE - Basic and Diluted $(.03) $(.01)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
- Basic and Diluted 43,323,536 52,659,835

EPIC ENERGY RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS

March 31, December 31,
ASSETS 2008 2007
(unaudited) (audited)
CURRENT ASSETS
Cash and cash equivalents $4,671,592 $3,483,179
Restricted cash 2,400,000 3,400,003
Accounts receivable:
Billed, net of allowance of
$636,000 8,700,949 11,334,690
Unbilled, at estimated net
realizable value 5,818,850 3,446,757
Accounts receivable - other 5,000 639,500
Prepaid expenses and other 212,589 309,081
TOTAL CURRENT ASSETS 21,808,980 22,613,210
Oil and gas properties (full cost
method), net of accumulated
impairments and depletion of $5,259,845
and $3,093,079, respectively:
Proved 5,247,746 5,247,746
Unproved - - Other mineral reserves 783,474 783,474
Property and equipment, net of
accumulated depreciation of $555,461
and $112,119, respectively 10,843,569 10,596,463
Other assets 219,410 209,213
Debt issuance costs, net of accumulated
amortization of $146,914 and $28,650,
respectively 1,882,141 1,690,350
Goodwill and intangible assets, net of
accumulated amortization of $29,412
and $4,902, respectively 36,347,394 33,609,064
TOTAL ASSETS 77,132,714 $74,749,520
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $3,969,972 $4,066,368
Bank overdrafts 626,848 3,441,949
Accrued liabilities 4,101,886 2,949,270
Customer deposits 3,083,781 1,357,862
Current portion of long term debt 5,025,944 3,208,135
TOTAL CURRENT LIABILITIES 16,808,431 15,023,584
Asset retirement obligations 134,777 132,626
Long-term debt, net of current portion
and debt discount of $12,225,626
and $12,878,572, respectively 14,168,722 13,928,954
TOTAL LIABILITIES 31,111,930 29,085,164
STOCKHOLDERS' EQUITY
Common stock, no par value:
100,000,000 authorized; 43,883,921
and 42,948,921 shares issued and
outstanding at March 31, 2008 and
December 31, 2007, respectively 42,007,303 40,698,806
Additional paid-in capital 13,726,847 13,416,792
Accumulated deficit (9,713,366) (8,451,242)
TOTAL STOCKHOLDERS' EQUITY 46,020,784 45,664,356
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $77,132,714 $74,749,520

EPIC ENERGY RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

Three Months Ended March 31,
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,262,124) $(451,704)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation, depletion and amortization 467,852 - Amortization of debt issuance costs 118,264 - Accretion expense 2,151 5,369
Shares issued for compensation 258,497 113,676
Amortization of debt discount 652,946 - Changes in operating assets and liabilities:
Accounts receivable 513,757 (66,336)
Prepaid expenses and other 272,297 32,462
Accounts payable (169,134) (70,670)
Accrued liabilities 2,873,942 86,813
Net cash provided by (used in)
operating activities 3,728,448 (350,390)
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in restricted cash 1,000,003 - Acquisition of property and equipment (572,795) - Acquisition of EIS, net of cash received 35,037 - Increase in other assets (191,810) - Net cash provided by investing
activities 270,435 - CASH FLOWS FROM FINANCING ACTIVITIES
Bank overdrafts (2,815,101) - Payments on debt (332,310) (42,184)
Proceeds from debt 336,941 - Net proceeds from issuance of common stock - 454,000
Net cash provided by (used in)
financing activities (2,810,470) 411,816
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,188,413 61,426
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 3,483,179 590,172
CASH AND CASH EQUIVALENTS, END OF PERIOD 4,671,592 $651,598
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $628,762 $- NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Insurance policies acquired with debt $- $25,992
Note payable for oil and gas
properties $71,002 $57,462
Acquisition of EIS with stock $1,050,000 $-

CONTACTS:
Rex P. Doyle, Chief Executive Officer
281-419-3742 / rdoyle@1epic.com

Lisa Elliott, Sr. Vice President
DRG&E - IR Counsel
713-529-6600 / lelliott@drg-e.com

First Call Analyst:
FCMN Contact: ksdennard@drg-e.com

Source: EPiC Energy Resources, Inc.

CONTACT: Rex P. Doyle, Chief Executive Officer of EPiC Energy Resources,
Inc., +1-281-419-3742, rdoyle@1epic.com; or Lisa Elliott, Sr. Vice President
of DRG&E - IR Counsel, +1-713-529-6600, lelliott@drg-e.com, for EPiC Energy
Resources, Inc.

Web site: http://www.1epic.com/

2008-05-20 18:24:24 0367167 PRNEWSWIRE