GEOMET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Revenues:
Gas sales $ 6,394 $ 18,674 $ 22,684 $ 54,956
Operating fees and other 97 146 272 648
---------- ---------- ---------- ----------
Total revenues 6,491 18,820 22,956 55,604
Expenses:
Total production expenses 4,678 5,204 16,018 15,700
Depreciation, depletion and
amortization 5,169 2,524 10,187 7,472
Impairment of gas
properties 69,146 -- 236,441 --
General and administrative 1,853 2,098 7,007 7,478
Realized (gains) losses on
derivative contracts (3,169) 1,390 (8,626) 2,021
Unrealized losses (gains)
on derivative contracts 3,567 (21,565) 5,526 (820)
---------- ---------- ---------- ----------
Total operating expenses 81,244 (10,349) 266,553 31,851
Operating (loss) income (74,753) 29,169 (243,597) 23,753
Other expenses & interest,
net (1,376) (1,084) (3,753) (3,455)
---------- ---------- ---------- ----------
(Loss) income before income
taxes (76,129) 28,085 (247,350) 20,298
Income tax benefit
(expense) 27,786 (10,604) 91,895 (8,135)
---------- ---------- ---------- ----------
Net (loss) income $ (48,343) $ 17,481 $ (155,455) $ 12,163
========== ========== ========== ==========
(Loss) income per share:
Net (loss) income
Basic $ (1.24) $ 0.45 $ (3.98) $ 0.31
========== ========== ========== ==========
Diluted $ (1.24) $ 0.44 $ (3.98) $ 0.31
========== ========== ========== ==========
Weighted average number of
common shares:
Basic 39,140 38,872 39,063 38,822
========== ========== ========== ==========
Diluted 39,140 39,839 39,063 39,714
========== ========== ========== ==========
GEOMET, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, December 31,
2009 2008
------------- -------------
Assets:
Current assets $ 8,178 $ 17,938
Properties and equipment, net of accumulated
depreciation, depletion, amortization and
impairment of gas properties 119,806 358,299
Deferred income taxes 46,170 --
Other assets 558 1,363
------------- -------------
Total assets $ 174,712 $ 377,600
============= =============
Liabilities and stockholders' equity:
Current liabilities $ 10,720 $ 19,379
Long-term debt 120,016 117,118
Deferred income taxes -- 43,842
Other long-term liabilities 5,721 4,829
------------- -------------
Total liabilities 136,457 185,168
------------- -------------
Total stockholders' equity 38,255 192,432
------------- -------------
Total liabilities and stockholders' equity $ 174,712 $ 377,600
============= =============
GEOMET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Nine Months Ended
September 30,
2009 2008
Net cash provided by operating activities $ 6,861 $ 24,970
Net cash used in investing activities (11,113) (36,512)
Net cash provided by financing activities 2,906 11,966
Effect of exchange rates changes on cash 67 (11)
---------- ----------
(Decrease) increase in cash and cash equivalents (1,279) 413
Cash and cash equivalents at beginning of period 2,097 1,540
---------- ----------
Cash and cash equivalents at end of period $ 818 $ 1,953
========== ==========
GEOMET, INC.
OPERATING STATISTICS
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2009 2008 2009 2008
--------- --------- --------- ---------
Net sales volumes (MMcf) 1,901 1,821 5,690 5,548
Per Mcf data ($/Mcf):
Average natural gas sales price $ 3.36 $ 10.26 $ 3.99 $ 9.91
Differential to NYMEX (1) $ (0.03) $ 0.04 $ 0.06 $ 0.20
Average natural gas sales price
realized (2) $ 5.03 $ 9.49 $ 5.50 $ 9.54
Adjusted lease operating
expense (3)(4) $ 1.63 $ 1.83 $ 1.91 $ 1.84
Compression expenses $ 0.48 $ 0.45 $ 0.47 $ 0.40
Transportation expense $ 0.17 $ 0.17 $ 0.24 $ 0.17
Production taxes $ 0.13 $ 0.33 $ 0.15 $ 0.30
Total production expenses, as
adjusted (3) $ 2.41 $ 2.78 $ 2.77 $ 2.71
Depreciation, depletion and
amortization $ 2.72 $ 1.39 $ 1.79 $ 1.35
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2009 2008 2009 2008
--------- --------- --------- ---------
POND CREEK FIELD
Net sales volumes (MMcf) 1,318 1,252 3,920 3,698
Per Mcf data ($/Mcf):
Lease operating expense $ 1.27 $ 1.46 $ 1.38 $ 1.53
Compression expense $ 0.41 $ 0.41 $ 0.38 $ 0.37
Transportation expense $ 0.23 $ 0.24 $ 0.33 $ 0.25
Production taxes $ 0.11 $ 0.19 $ 0.12 $ 0.15
Total production expenses $ 2.02 $ 2.30 $ 2.21 $ 2.30
GURNEE FIELD
Net sales volumes (MMcf) 527 558 1,620 1,667
Per Mcf data ($/Mcf):
Adjusted lease operating
expense (3) $ 2.11 $ 2.55 $ 2.57 $ 2.69
Compression expense $ 0.50 $ 0.55 $ 0.56 $ 0.53
Production taxes $ 0.19 $ 0.64 $ 0.23 $ 0.60
Total production expenses, as
adjusted (3) $ 2.80 $ 3.74 $ 3.36 $ 3.82
(1) The difference between the average natural gas price for the period,
before the impact of gain and losses on derivative contract, and the
final average settlement price for natural gas contracts on the New
York Mercantile Exchange ("NYMEX") for each month during the applicable
period weighted by gas sales volumes
(2) Average realized price includes the effects of realized gains on
derivative contracts.
(3) Produced water disposal fees are recorded as operating fees and other
on the Statement of Operations. Lease operating expense per Mcf has
been adjusted for produced water disposal fees because the fees are not
reflected in the net gas sales volumes. See Reconciliation of Adjusted
Lease Operating Expense.
(4) The 2009 adjusted lease operating expenses include lease operating
expenses in three new areas, the Garden City prospect, the Lasher field
and the Peace River field; none of which had meaningful operations
during the prior year period. Per unit operating expenses are generally
higher in the initial start up of a new field before economies of scale
have been realized.
GEOMET, INC.
CONSOLIDATED DERIVATIVE CONTRACT POSITIONS
At September 30, 2009, the Company had the following natural gas collar
positions:
Volume Sold Bought Sold
Period (MMBtu) Ceiling Floor Floor
-------- ------- -------- -------
October 2009 (1) 186,000 $ (1) $ 7.50 $ 5.25
October 2009 (1) 186,000 $ (1) $ 8.50 $ 6.50
October 2009 (1) 372,000 $ 4.50 $ 3.70 $ (1)
November 2009 through March 2010 906,000 $ 11.20 $ 9.50 $ 7.00
November 2009 through March 2010 604,000 $ 6.65 $ 5.50 $ 3.50
April through October 2010 856,000 $ 6.80 $ 5.50 $ 3.50
April through October 2010 856,000 $ 6.35 $ 5.50 $ -
November 2010 through March 2011 604,000 $ 7.45 $ 6.50 $ -
(1) In connection with the October 2009 natural gas collar denoted above,
the Company eliminated the existing $10.00 sold ceilings with respect
to all three-way-collars through October 2009.
At September 30, 2009, the Company had the following natural gas swap
position:
Volume
Period (MMBtu) Price
--------- ---------
October 2009 124,000 $ 4.47
April through October 2010 856,000 $ 5.70
November 2010 through March 2011 604,000 $ 6.67
April 2011 through October 2011 856,000 $ 6.37
November 2011 through March 2012 608,000 $ 7.12
At September 30, 2009, the Company had the following interest rate swap
positions:
Designated
Effective maturity Fixed Notional
Description date date rate (2) amount
------------ ------------ ----------- ------------
Floating-to-fixed swap 12/14/2007 12/14/2010 3.86% $ 15,000,000
Floating-to-fixed swap 1/3/2008 1/4/2010 3.95% $ 10,000,000
Floating-to-fixed swap 3/25/2008 3/25/2010 2.38% $ 10,000,000
Floating-to-fixed swap 5/13/2008 5/13/2010 3.07% $ 5,000,000
Floating-to-fixed swap 1/6/2009 1/6/2011 1.38% $ 5,000,000
(2) The floating rate paid by the counterparty is the British Bankers'
Association LIBOR rate.
Subsequent to September 30, 2009, the Company entered into the
following natural gas swap position:
Volume
Period (MMBtu) Price
--------- ---------
April through October 2010 642,000 $ 6.30
November 2010 through March 2011 906,000 $ 7.26
GEOMET, INC.
RECONCILIATION OF ADJUSTED EBITDA TO NET (LOSS) INCOME
(In thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Net (loss) income $ (48,343) $ 17,481 $ (155,455) $ 12,163
Add: Interest expense, net
of interest income and
amounts capitalized 1,380 1,102 3,766 3,502
(Deduct): Other income (4) (18) (13) (48)
(Deduct): Income tax
(benefit) expense (27,786) 10,604 (91,895) 8,135
Add: Depreciation,
depletion and
amortization 5,169 2,524 10,187 7,472
Add: Impairment of gas
properties 69,146 -- 236,441 --
Add: Unrealized losses
(gains) on derivative
contracts 3,567 (21,565) 5,526 (820)
Add: Stock based
compensation 160 102 661 486
Add: Accretion expense 111 90 324 258
---------- ---------- ---------- ----------
Adjusted EBITDA $ 3,400 $ 10,320 $ 9,542 $ 31,148
========== ========== ========== ==========
The table above reconciles net (loss) income to Adjusted EBITDA. Adjusted
EBITDA is defined as net (loss) income before net interest expense, other
non-operating income, income taxes, depreciation, depletion and
amortization, and minority interest before unrealized losses (gains) on
derivative contracts, stock-based compensation and accretion expense.
Although Adjusted EBITDA is not a measure of performance calculated in
accordance with accounting principles generally accepted in the United
States of America (GAAP), management believes that it is useful to GeoMet
and to an investor in evaluating our company because it is a widely used
measure to evaluate a company's operating performance.
GEOMET, INC.
RECONCILIATION OF ADJUSTED NET (LOSS) INCOME TO NET (LOSS) INCOME
(In thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Net (loss) income $ (48,343) $ 17,481 $ (155,455) $ 12,163
Impairment of gas
properties 69,146 -- 236,441 --
Unrealized losses (gains)
on derivative contracts,
net of tax 3,567 (21,565) 5,526 (820)
Accelerated depletion -
Canada 2,742 -- 2,742 --
Effect of income taxes (27,759) 8,143 (91,711) 328
---------- ---------- ---------- ----------
Adjusted Net (Loss) Income $ (647) $ 4,059 $ (2,457) $ 11,671
========== ========== ========== ==========
The table above reconciles net (loss) income to Adjusted Net (Loss) Income.
Adjusted Net (Loss) Income is calculated by eliminating unrealized losses
(gains) on derivative contracts from net (loss) income, non-cash
accelerated depletion and impairments to our gas properties, and their
related tax effects to arrive at Adjusted Net (Loss) Income. The tax
effects are determined by calculating the tax provision for GAAP net (loss)
income and comparing the results to the tax provision for Adjusted Net
(Loss) Income, which excludes the adjusting items. The difference in the
tax provision calculations represents the effect of income taxes. The
calculation is performed at the end of each quarter and, as a result, the
tax rates for each discrete period are different. Although Adjusted Net
(Loss) Income is a non-GAAP measure, we believe it is useful information
for investors because the unrealized losses (gains) relate to derivative
contracts that hedge our production in future months. The losses (gains)
associated with derivative contracts that hedge current production are
recognized in net (loss) income and are not eliminated in determining
Adjusted Net (Loss) Income. The adjustment better matches losses (gains)
on derivative contracts with the period when the underlying hedged
production occurs.
GEOMET, INC.
RECONCILIATION OF ADJUSTED LEASE OPERATING EXPENSE
(In thousands)
Three Months
Ended Nine Months Ended
September 30, September 30,
----------------- -----------------
2009 2008 2009 2008
-------- -------- -------- --------
Lease operating expense $ 3,195 $ 3,475 $ 11,113 $ 10,867
Deduct: Produced water disposal fees 97 146 272 647
-------- -------- -------- --------
Adjusted lease operating expense $ 3,098 $ 3,329 $ 10,841 $ 10,220
======== ======== ======== ========
The table above reconciles lease operating expense to adjusted lease
operating expense. Adjusted lease operating expense is calculated by
eliminating the produced water disposal fees from lease operating expense
to arrive at adjusted lease operating expense. Although adjusted lease
operating expense is a non-GAAP measure, we believe it is useful
information for investors because produced water disposal fees are recorded
as operating fees and other on the Statement of Operations. Lease operating
costs per Mcf are adjusted for produced water disposal fees because the
fees are not reflected in the net gas sales price. The adjustment better
matches lease operating expense with the natural gas sales revenues it is
associated with.
Contact Information: For more information please contact: Stephen M. Smith (713) 287-2251 John Baldissera BPC Financial (800) 368-1217 or visit our website at www.geometinc.com