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Warren Resources Announces Second Quarter 2007 Results

* Quarterly earnings increase 29% to $2.7 million
* Quarterly oil and gas revenue surges 75%
* Quarterly production up 71%
* Annual production guidance increased

NEW YORK, Aug. 3, 2007 (PRIME NEWSWIRE) -- Warren Resources, Inc. (Nasdaq:WRES) today announced 2007 second quarter financial and operating results. The Company reported net earnings increased 29% to $2.7 million or $0.05 per diluted common share for the second quarter ended June 30, 2007. This compares to net earnings of $2.1 million or $0.04 per diluted common share for the second quarter of 2006.

Warren's oil and gas revenues increased 75% to $13.3 million for the second quarter of 2007 compared to the second quarter of 2006. This increase reflected a 71% increase in oil and gas production in the second quarter of 2007 compared to the second quarter of 2006. The second quarter production increase was primarily due to a 127% increase in oil production from one of the Company's core assets, the Wilmington Townlot Unit ("WTU") in California. Additionally, Warren realized a 30% sequential growth in oil production in the WTU in the second quarter of 2007 over the first quarter of 2007.

Second Quarter 2007 Financial Highlights

Total revenues increased 57% to $13.9 million for the second quarter of 2007 as compared to the second quarter of 2006. The Company reported the highest quarterly production in its history. Production for the second quarter of 2007 increased to a record 1.5 billion cubic feet equivalent ("Bcfe") from 0.9 Bcfe in the second quarter of 2006.

 Production volumes for the quarter are as follows:

                                       Three months ended
                                June 30, 2007      June 30, 2006
                                -------------      -------------
 Oil (Mbbls)                        211.1              105.0
 Gas (Mmcf)                         249.5              258.0
 Total Production (Mmcfe)         1,516.3              888.1

The average realized price per barrel of oil was $57.33 for the second quarter of 2007 compared to $59.35 for the second quarter 2006. Additionally, the average realized price per Mcf of gas was $4.98 for the second quarter of 2007 compared to $5.43 for the second quarter of 2006.

Total expenses increased 67% to $11.1 million during the second quarter of 2007 compared to 2006. Production and exploration expense and DD&A expense increased 85% and 81%, respectively, primarily due to increased production.

Cash flow from operations increased 171% to $10.5 million for the first six months of 2007 compared to $3.9 million for the first six months of 2006.

"We are very pleased that we were able to continue to deliver strong organic growth in our production, revenues, earnings and cash flow during the second quarter. Additionally, we continue to be very encouraged by the excellent results of our WTU horizontal Tar wells," stated Norman F. Swanton, Warren's Chairman and CEO.

                          OPERATIONAL UPDATE

Wilmington Townlot Unit, California

Warren invested $18.8 million in capital expenditures in the WTU during the second quarter of 2007. The Company drilled 12 gross (11.8 net) wells and completed the southern half of cellars #1 and #2 in the project in our central facility. During the quarter, drilling costs totaled $15.1 million and cellar construction, gathering and equipment costs totaled $3.7 million. Warren has two drilling rigs operating in the WTU central facility and plans to keep two drilling rigs for the balance of 2007. We anticipate drilling a total of 48 gross (47 net) WTU wells during 2007. Warren has budgeted $28.9 million for drilling costs and $10.6 million for completion of the cellar construction and infrastructure improvements in the second half of 2007.

The Company has drilled and completed a total of 12 horizontal wells in the D-1A sand of the Tar formation. These wells are currently producing a total of over 1,200 barrels of oil per day ("BOPD") of 14 gravity crude oil with a water/oil ratio of 2 and without any reservoir pressure assistance from water injection. We have identified 8 additional drilling locations in this formation for 2007. As we are drilling these wells, we will evaluate additional potential horizontal drilling targets in several prospective sands within the Tar formation. Additionally, the Company plans to test the highly prospective sands in the deeper Ranger C and UP/Ford formations.

The 40 Upper Terminal producing wells that we drilled currently average approximately 25 BOPD each. These parameters are generally within the Company's expectations, especially since the field is only beginning to benefit from the effects of increased water injection support. We believe this benefit will become more evident over the next twelve to twenty-four months as water injection into the reservoir is increased. Additionally, new completion techniques, including gravel packed open hole completions and post completion acid/xylene washes, appear to be promising techniques for increasing net oil production rates in the Upper Terminal waterflood project.

In the second quarter, the Company drilled and completed one Ranger formation producing well (two new Ranger producers and one Ranger water injector are waiting on a rig move for completion). The new Ranger well is producing approximately 45 BOPD with a water/oil ratio of 7. The early results give further encouragement for future drilling in the Ranger formation. Warren plans to drill 6 additional Ranger producing wells in 2007.

As a result of the increased oil production from the WTU, the Company has entered into an agreement to construct a 0.9 mile, 10" connecting pipeline to facilitate large scale transportation of WTU crude oil to the local Los Angeles Basin oil refineries, including ConocoPhillips' Carson refinery. Additionally, Warren plans to complete the installation of six microturbines to convert flared gas to electric generation at the WTU. Both projects are expected to be operational during the fourth quarter of 2007. Since taking over operations of the WTU in March 2005, Warren has increased gross oil production in the Unit from 375 BOPD to our current production of approximately 2,700 BOPD for an increase of 620%. This significant increase results from additional production from new wells drilled and completed in the Upper Terminal, Ranger and Tar formations. Warren owns a 99% working interest in the WTU.

North Wilmington Unit, California

The North Wilmington Unit ("NWU") is adjacent to the WTU in the Los Angeles Basin in California. Current production from the NWU is 425 gross BOPD. Warren are planning to rework 6 wells at a total cost of approximately $1.4 million during the balance of 2007. Also, the Company has budgeted $1.3 million for facilities and infrastructure upgrades in the second half of 2007 in anticipation of our future drilling campaign in 2008. Warren has also signed an agreement to tie its NWU production into a nearby crude oil pipeline to transfer NWU oil directly to a local refinery. The Company owns a 100% working interest in the NWU.

Atlantic Rim Coalbed Methane Project in the eastern Washakie Basin, Wyoming

Warren anticipates that the Warren/Anadarko Atlantic Rim Joint Venture will commence drilling activities in the Sun Dog Unit of the Atlantic Rim in the Washakie Basin in mid August 2007. This will be the first activity since the U.S. Bureau of Land Management ("BLM") issued its Record of Decision in May 2007 approving the Final Environmental Impact Statement ("EIS") for development of the Atlantic Rim coalbed methane ("CBM") project. Warren anticipates investing $34 million for Atlantic Rim capital expenditures during the balance of 2007. The majority of the Atlantic Rim drilling budget represents drilling 75 gross (69 producing and 6 injection wells) in the Sun Dog unit which management believes has shown the best results to-date in the play. The Company will have an approximate working interest of 42%. Also, the budget includes $4.9 million for drilling additional wells in the Blue Sky and Catalina units and for other various development activities and pipeline construction.

As previously reported, the BLM's Record of Decision for the EIS allows the development of the Atlantic Rim project by drilling up to 2,000 wells of which 1,800 would be CBM wells and 200 deeper conventional wells. Based on the current knowledge of geologic formations, the BLM's minimum well spacing will be 80 acres per CBM well. Several environmental groups, however, have recently filed administrative appeals of the BLM's decision approving the EIS to the Interior Board of Land Appeals (IBLA). The IBLA is the administrative arm of the Department of Interior that hears appeals of decisions rendered by the Department of Interior's BLM division. These appeals contain claims ranging from the EIS does not consider enough alternatives to that it does not allow enough hunting in the Atlantic Rim. Several groups are seeking a stay of development activity in the Atlantic Rim Project area. An initial response by the IBLA is expected on or about August 6, 2007. Since the commencement of the EIS in 2001, various environmental groups have filed numerous administrative appeals of BLM decisions approving environmental assessments within the Atlantic Rim project, none of which have been upheld by the IBLA to date.

Additionally, on April 19, 2007, FERC approved the Rockies Express Pipeline (REX) expansion to move gas from the Rockies to the Midwest and eventually the Northeast. This should significantly increase the take-away capacity for natural gas from the Rockies to the Midwest markets. REX is expected to be operational during the first quarter of 2008.

South Seminoe Deep Exploratory Prospect, Hanna Basin, Wyoming

The Company reported that the Ferris #2285 N 13 well, its first South Seminoe exploratory well in the Hanna Basin, has been drilled, completed and fracture stimulated. As earlier reported, significant hydrocarbons were encountered during the drilling of the well, however, low porosity and tight reservoir rocks were also encountered. The Ferris well was drilled to the base of the Tensleep formation and production casing was set to a total well depth of 16,670 feet. The Tensleep formation was perforated and stimulated with a single-stage CO2 frac job. At this time, we are in the process of recovering our frac job and expect it will take several more weeks to fully evaluate the Tensleep formation.

Change in Accounting Principle

As of April 1, 2007, the Company converted to the full cost method of accounting for its oil and gas properties from the successful efforts method. The Company believes the full cost method is preferable for a company actively involved in the exploration and development of oil and gas properties. As a result, all current and historical financial comparisons reflect the full cost method of accounting.

Increased 2007 Guidance

Warren provides the following updated forecast for capital expenditures and production based upon the information available at the time of this release. Please see the forward-looking statement at the end of this release for more discussion of the inherent limitations of this information.

                         Third Quarter ending     Year ending
                          September 30, 2007    December 31, 2007
                          ------------------    -----------------
 Oil (MBbl)                      225-235            800-875
 Gas (MMcf)                      325-375          1,000-1,200
 Gas Equivalent (MMcfe)        1,675-1,785        5,800-6,450
 Capex Budget (in millions)       $35.0              $122.0

"We had a great start to what we expect to be a year of record earnings for our Company, with excellent rates of return as well as better than anticipated production growth in the first half of 2007," said Norman F. Swanton, Warren's Chairman and CEO. "We achieved record production, all organic, particularly in the Wilmington oil field in California. As a result of the success we have achieved so far, we are increasing our full year production guidance. We are optimistic that by maintaining our operational momentum we can deliver excellent growth, both in terms of reserves and production, in 2007 and get a head start on 2008."

Financial and Statistical Data Tables

Following are financial highlights for the comparative second quarters ended June 30, 2007 and 2006.

 Warren Resources, Inc.
 Consolidated Statements Of Operations (Unaudited)

                                              Three Months Ended
                                                  June 30,
                                            2007       2006 (Restated)
                                      --------------   ---------------
    Oil and gas sales                    $13,347,043      $ 7,634,160
    Interest and other income                588,784        1,153,179
    Net gain (loss) on investments           (30,351)          72,731
                                         ------------     ------------
                                          13,905,476        8,860,070
                                         ------------     ------------
    Lease operating expense and taxes      5,165,860        2,793,392
    Depreciation, depletion and
     amortization                          2,582,059        1,425,577
    General and administrative             2,964,014        2,357,786
    Interest                                 431,255           99,030
                                         ------------     ------------
                                          11,143,188        6,675,785
                                         ------------     ------------
 Income before provision for income taxes  2,762,288        2,184,285

    Deferred income tax expense               18,000           56,000
                                         ------------     ------------
 Income before dividends and
  accretion on preferred shares            2,744,288        2,128,285

    Less dividends and accretion on
     preferred shares                         66,952           45,223
                                         ------------     ------------
 Net income applicable to common
  stockholders                           $ 2,677,336      $ 2,083,062
                                         ============     ============
 Earnings per share - Basic              $      0.05      $      0.04
 Earnings per share - Diluted            $      0.05      $      0.04

 Weighted average common shares
  outstanding - Basic                     54,843,482       52,830,408
 Weighted average common shares
  outstanding - Diluted                   56,140,918       54,384,583

    Gas - MMcf                                 249.5            258.0
    Oil - MBbls                                211.1            105.0
    Total Equivalents (MMcfe)                1,516.3            888.1

 Realized Prices:
    Gas - Mcf                            $      4.98      $      5.43
    Oil - Bbl                                  57.33            59.35
    Total Equivalents (Mcfe)                    8.80             8.59

                                              Six Months Ended
                                                  June 30,
                                           2007        2006 (Restated)
                                      --------------   ---------------

 Net cash flow provided by operating activities:

    Cash flow from operations            $10,525,278      $ 3,888,345
    Changes in working capital accounts   (1,088,815)       2,803,339
    Cash flow from operations before
     working capital changes               9,436,463        6,691,684

Conference Call

The public is invited to listen to the Company's conference call set for today, August 3, 2007, at 10:30 a.m. Eastern Time. The call will be webcast and can be accessed from the Company's website at: If you are unable to participate during the live broadcast, the webcast will be archived on Warren's website. A telephonic replay will also be available one week beginning at approximately 1:00 p.m. on August 3, 2007. To access the replay, dial (888) 286-8010, or if international dial (617) 801-6888, and provide the passcode code, 49785107.

About Warren Resources

Warren Resources, Inc. is a growing independent energy company engaged in the exploration and development of domestic natural gas and oil reserves. Warren is primarily focused on the exploration and development of coalbed methane properties located in the Rocky Mountain region and water flood oil recovery and horizontal drilling programs in the Wilmington field in California. The Company is headquartered in New York, New York, and its exploration and development subsidiary, Warren E&P, Inc., has offices in Casper, Wyoming and Long Beach, California.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Statements regarding projections of revenues or income or reserves or similar items, such as statements pertaining to future revenues, future capital expenditures, future cash flows, future operations or results, and other statements that are not historical facts, are examples of forward looking statements. These forward-looking statements reflect our current views with respect to future events, based on what we believe are reasonable assumptions. No assurance can be given, however, that these events will occur. These statements are subject to risks and uncertainties that could cause actual results to differ materially, including without limitation risks of declining oil and gas prices, competition for prospects, accuracy of reserve estimates, estimated rates of production, increases in drilling and lifting costs, increases in equipment and supply costs and other factors detailed in the Company's filings with the Securities and Exchange Commission (

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SOURCE: Warren Resources, Inc.

Warren Resources, Inc.
Media Contact:
David Fleming
(212) 697-9660