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Warren Resources Announces Third Quarter 2012 Financial and Operating Results

Warren Resources Announces Third Quarter 2012 Financial and Operating Results

NEW YORK, Nov. 7, 2012 (GLOBE NEWSWIRE) --

Third Quarter Highlights:

  *Record Quarterly Oil Production Growing 27% Over 2011 level
  *Oil and Gas Revenues Increase 21% to $31.4 million for 3Q 2012
  *Nine Months Cash Flow from Operations Increases 64% to $52.6 million
  *Oil Sales Represent approximately 90% of Total Oil and Gas Revenue
  *Gross Margin for Oil Was $78 per Barrel

Warren Resources, Inc. (Nasdaq:WRES) today reported its third quarter 2012
financial and operating results. Warren reported net income of $2.4 million,
or $0.03 per basic and diluted share (including a loss on derivative financial
instruments of $3.4 million), compared to a net income of $10.2 million, or
$0.14 per basic and diluted share, for the third quarter of 2011 (including a
gain on derivative financial instruments of $4.0 million).

In announcing the results, Espy P. Price, Chairman and Chief Executive
Officer, commented, "We had a good quarter as production volumes, oil and gas
revenues and operating cash flow each recorded significant gains compared to
the third quarter of 2011. As a result of the 2012 California drilling
program, Warren's oil and gas revenues increased to $31.4 million for the
third quarter of 2012 compared to $26.0 million in the third quarter of 2011.
This increase resulted from a 27% increase in oil production. Warren is
currently producing approximately 3,700 gross (3,000 net) barrels of oil per
day ("BOPD") at our two Wilmington Field units."

Third Quarter of 2012 Results

Warren's oil and gas revenues increased 21% to $31.4 million for the third
quarter of 2012, compared to $26.0 million in the third quarter of 2011. This
increase primarily resulted from increased oil production in the third quarter
of 2012 compared to the third quarter of 2011.Warren's oil production for the
quarter ended September 30, 2012 increased 27% to 294,000 barrels of oil,
compared to 232,000 barrels of oil produced in the third quarter of 2011.
Warren produced 1.2 billion cubic feet ("Bcf") of natural gas for the third
quarter of 2012 compared to 1.3 Bcf in the third quarter of 2011. Natural gas
produced in thethird quarter did not include any productionfrom the
acquisition on October 9, 2012 as discussed in more detail below.

The average realized price per barrel of oil was $95 for the third quarter of
2012 compared to $89 for the third quarter of 2011. Additionally, the average
realized price per thousand cubic feet ("Mcf") of natural gas was $2.82 for
the third quarter of 2012, compared to $4.18 for the third quarter of 2011.
These realized commodity prices exclude the cash effect of derivative
activities. The net loss on derivative financial instruments was $3.4 million
during the three months ended September 30, 2012, which was comprised of a
$0.7 million realized loss on oil and gas commodity price derivatives and a
$2.7 million unrealized mark-to-market, non-cash loss on oil and gas commodity
price derivatives.

Total operating expenses increased 29% to $24.7 million during the third
quarter of 2012, compared to $19.2 million during the third quarter of 2011.
Lease operating expenses and taxes ("LOE") decreased 10% to $7.1 million, or
$14.32 per barrel of oil equivalent ("BOE"), in the third quarter of 2012,
compared to $7.9 million, or $17.59 per BOE, during the same period in 2011.
This decrease was primarily attributable tolower severance taxes and workover
expense in the Atlantic Rim Project.

Depreciation, depletion and amortization expenses were $13.2 million for the
three months ended September 30, 2012, or $26.75 per BOE, which represents a
74% increase over the same period in 2011. This increase resulted from a write
down of approximately 54 Bcf of natural gas reserves due to lower commodity
pricing, as well as an increase in estimated future development costs.

General and administrative ("G&A") expenses increased $0.7 million to $4.4
million for the third quarter of 2012, compared to $3.7 million for the third
quarter of 2011. This increase was primarily due to $0.4 million of expense
associated with the accelerated vesting of equity related to the Company's
former chairman and chief executive officer, and $0.2 million of additional
consulting expense incurred during the third quarter of 2012.

Total cash flow from operating activities increased 64% to $52.6 million in
the first nine months of 2012, compared to $32.2 million in the first nine
months of 2011. This increase primarily resulted from increased oil
production.

Interest expense increased 14% to $0.85 million for the third quarter of 2012,
compared to $0.75 million for the third quarter of 2011. This increase was
primarily due to increased borrowings under our senior credit facility.

Debt and Liquidity

The Company's senior credit facility has a borrowing base of $130 million,
with $30.5 million of borrowing capacity available at September 30, 2012. The
borrowing base is currently undergoing the fall 2012 re-determination process.
On October 5, 2012, the Company borrowed an additional $10 million to help
finance the Atlantic Rim Asset Acquisition fromAnadarko Petroleum Corporation
("Anadarko")discussed in more detail below. Additionally, on November 5,
2012, the Company repaid $5 million under the credit facility. As a result,
the current outstanding balance under the credit facility is $104.5 million.
Currently, Warren is in full compliance with all covenants under its senior
credit facility.

Recent Operational Developments

Wilmington Oil Field in the Los Angeles Basin in California

During the third quarter of 2012, the Company drilled and completed 6
producing wells in the Wilmington Townlot Unit ("WTU") in California,
consisting of 2 wells in the Tar formation and 4 sinusoidal wells in the Upper
Terminal formation. Thirty day initial production ("30-day IP") rates for each
of the new Tar wells averaged 35 BOPD. Notably, one Tar well was drilled in
the thinner Tar Du reservoir, and the Tar D1A well was drilled on the flank of
the structure and encountered thinner pay and some mechanical problems. For
full year 2012, the Company drilled 8 Tar formation wells that had average
30-day IP's of 112 BOPD and ranged from 31 to 175 BOPD.Thirty day IP rates
for the four new Upper Terminal wells averaged 77 BOPD. For full year 2012,
the 5 Upper Terminal formation wells drilled had average 30-day IP's of 89
BOPD, and ranged from 24 to 144 BOPD.The 24 BOPD Upper Terminal well has
mechanical problems and is being evaluated for remedial work.Capital
expenditures for the third quarter of 2012 in California were $10 million,
consisting of $7 million for drilling and development operations in the WTU,
and $3 million for facilities improvements and infrastructure costs in the WTU
and North Wilmington Unit ("NWU").

Warren has concluded its 2012 drilling plan, which consisted of 17 producing
wells and one water injection well at the WTU. The 17 producing wells drilled
in 2012 had an average 30-day IP rate of 90 BOPD, and decline rates based on
the typical type curves for each reservoir. Estimated capital expenditures in
California are forecasted to be $4 million for the fourth quarter of 2012 and
$45 million for the full year 2012.

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

Spyglass Hill Unit - Recent Developments

The Spyglass Hill Unit covers approximately 113,000 gross acres in the
southern portion of the Atlantic Rim Project area of the Washakie Basin in
Wyoming. As previously announced, on October 9, 2012, the Company completed
the purchase of additionalworking interestsand midstream assets in the
Spyglass Hill and Catalina Units from subsidiaries of Anadarko for a total
purchase price of $16.1 million. By exercising its preferential rights and
closing this transaction with Anadarko, Warren acquired (a) 79% of Anadarko's
41.5% working interest in the Spyglass Hill Unit within the Atlantic Rim
Project, representing approximately 37,142 net leasehold acres and an
approximate 32.8% additional total unit working interest therein; (b) 26.5% of
Anadarko's interest in the Catalina Unit within the Atlantic Rim Project,
representing approximately 1,121 net leasehold acres and an approximate 5.2%
additional total unit working interest therein; and (c) 100% of Anadarko's 50%
interest in the gas gathering, compression and pipeline midstream assets
within the Atlantic Rim Project.

As a result of the transaction,Warren added naturalgas production of
approximately 7.8 million cubic feet per day ("Mcfd"), bringing the daily gas
production to approximately 20.0 Mcfd. Estimated capital expenditures in
Wyoming are forecasted to be $1 million for the fourth quarter of 2012 and $5
million for the full year 2012.

The Spyglass Hill Unit agreement requires the working interest owners to drill
25 gross coalbed methane ("CBM") wells per year. If the 25 required CBM wells
are not drilled by June 10, 2013, the Unit will contract around the existing
participating areas, which cover approximately 21,895 gross (15,746 net)
acres, including the deep rights which are prospective for Niobrara oil and
other deep formations. The leases outside the participating areas, but within
the Spyglass Hill Unit, would then receive a two year extension.

2012 GUIDANCE

Warren provides the following updated forecast for net production based on 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.

                      Fourth Quarter ending Year ending

                      December 31, 2012     December 31, 2012
                                          
Production:
Oil (MBbl)           270 – 285             1,106 – 1,121
Gas (MMcf)           1,700 – 1,900         5,373 – 5,573
Oil Equivalent (BOE) 553 – 602             2,002 – 2,050

Financial and Statistical Data Tables

Following are financial highlights for the comparative third quarters ended
September 30, 2012 and 2011. All production volumes and dollars are expressed
on a net revenue interest basis.

Warren Resources, Inc.
Consolidated Statements Of Operations
                                                              
                          Three Months Ended        Nine Months Ended
                          September 30, (unaudited) September 30, (unaudited)
                          2012          2011        2012         2011
                                                   
                          (in thousands, except     (in thousands, except
                           per share information)    per share information)
Operating Revenues                                             
Oil and gas sales          $31,361       $26,018     $89,893      $76,091
                                                              
Operating Expenses                                             
Lease operating expenses   7,084         7,894       22,761       24,335
and taxes
                                                              
Depreciation, depletion    13,234        7,604       34,571       20,582
and amortization
                                                              
General and administrative 4,417         3,684       14,927       10,847
                                                              
Total operating expenses   24,735        19,182      72,259       55,764
                                                              
Income from operations     6,626         6,836       17,634       20,327
                                                              
Other income (expense)                                         
                                                              
Interest and other income  15            27          59           62
Interest expense           (853)         (749)       (2,458)      (2,093)
                                                              
Gain (loss) on derivative  (3,383)       4,001       (3,772)      266
financial instruments
                                                              
Total other income         (4,221)       3,279       (6,171)      (1,765)
(expense)
                                                              
Income before income taxes 2,405         10,115      11,463       18,562
                                                              
Deferred income tax        (3)           (69)        (14)         (76)
benefit
                                                              
Net income                 2,408         10,184      11,477       18,638
                                                              
Less dividends and
accretion on preferred     3             3           8            8
shares
                                                              
Net income applicable to   $2,405        $10,181     $11,469      $18,630
common stockholders
                                                              
Income per share - Basic   $0.03         $0.14       $0.16        $0.26
                                                              
Income per share - Diluted $0.03         $0.14       $0.16        $0.26
                                                              
Weighted average common    71,179        70,877      71,089       70,812
shares outstanding - Basic
                                                              
Weighted average common
shares outstanding -       72,040        71,951      72,027       72,066
Diluted
                                                              
Production:                                                    
Gas - MMcf                 1,202         1,303       3,673        3,720
Oil - MBbls                294           232         836          665
Total Equivalents (MBoe)   495           449         1,448        1,285
                                                              
Realized Prices:                                               
Gas - Mcf                  $2.82         $4.18       $2.50        $4.15
Oil - Bbl                  $95.02        $88.79      $96.55       $91.21
Total Equivalents (Boe)    $63.39        $57.96      $62.08       $59.23
                                                              
                                                   
                          Three Months Ended        Nine Months Ended
                          September 30, (unaudited) September 30, (unaudited)
                          2012          2011        2012         2011
                          (in thousands)            (in thousands)
Net cash flow provided by                                      
operating activities:
                                                              
Cash flow from operations $20,428       $12,229     $52,637      $32,185
                                                              
Changes in working capital (955)         (715)       (3,493)      (1,812)
accounts
                                                              
Cash flow from operations
before working capital     $19,473       $11,514     $49,144      $30,373
changes
                                                              

Forward-Looking Statements

Portions of this press release contain 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. A number of factors can and will cause actual
results to differ materially from the projections, anticipated results or
other expectations expressed in this release. Warren believes that its
expectations are based on reasonable assumptions. No assurance, however, can
be given that such expectations will prove to have been correct. Some factors
that could cause actual results to differ materially from those in the
forward-looking statements, include, but are not limited to, changes in oil
and gas prices, changes in expected levels of oil and gas reserve estimates
and production estimates, the timing and results of drilling and other
development activities, governmental and environmental regulations and
permitting requirements and delays, the availability of capital and credit
market conditions, unsuccessful exploratory activities, planned capital
expenditures, unexpected cost increases, delays in completing production,
treatment and transportation facilities, the availability and cost of
obtaining equipment and technical personnel, operating hazards, risks
associated with the availability of acceptable transportation arrangements,
unanticipated operational problems, potential liability for remedial actions
under existing or future environmental regulations, changes in tax,
environmental and other laws applicable to our business as well as general
domestic and international economic and political conditions. All
forward-looking statements are made only as of the date hereof and, unless
legally required, the Company undertakes no obligation to update any such
statements, whether as a result of new information, future events or
otherwise. The reserve replacement ratio and finding and development cost per
unit are statistical indicators that have limitations, including their
predictive and comparative value. Further information on risks and
uncertainties that may affect Warren's operations and financial performance,
and the forward-looking statements made herein, is available in the Company's
filings with the Securities and Exchange Commission (www.sec.gov), including
its Annual Report on Form 10-K under the headings "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and in other public filings and press releases.

About Warren Resources

Warren Resources, Inc. is an independent energy company engaged in the
exploration and development of domestic oil and natural gas reserves. Warren's
activities are primarily focused on oil in the Wilmington field in California
and natural gas in the Washakie Basin in Wyoming. The Company is headquartered
in New York, New York, and its exploration and development subsidiary, Warren
E&P, Inc., has offices in Long Beach, California and Casper, Wyoming.

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

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