HOUSTON, TX--(Marketwired - Nov 14, 2013) - GeoMet, Inc. (
Management's Current Business Plan
We previously disclosed our engagement of FBR Capital Markets & Co. to assist the Company in exploring strategic alternatives. We have concluded that process, and have engaged Lantana Oil & Gas Partners to assist us in pursuing the possible sale of all or substantially all of our assets.
We currently anticipate that any such sale transaction would be followed by either a merger or a liquidation and distribution of our remaining assets in accordance with applicable law. Generally, in a dissolution, the net proceeds of a sale would be used to repay the amount outstanding under our Credit Agreement and make adequate provision for satisfaction of other known or contingent payment obligations. Remaining assets, if any, would first be used to satisfy all or a portion of the liquidation preference of our outstanding Preferred Stock, then, if any assets remained, be made available for distribution to the holders of our common stock.
Any such sale of assets, and any subsequent merger or liquidation, would require approval by (i) our board of directors, (ii) the holders of a majority of our Preferred Stock (voting separately as a class), and (iii) the holders of a majority of our outstanding shares with holders of the Preferred Stock voting with the common stock on an as-converted basis. On an as-converted basis, the Preferred Stock currently represents approximately 52% of the outstanding shares and therefore would have the ability to control any vote requiring the approval of our shareholders, including a vote to approve a sale transaction and any subsequent merger or liquidation.
No assurance can be given that a suitable proposal for the sale of all or substantially all of our assets will be presented, that any sale transaction will be consummated, or the terms or structure of any transaction if such a sale transaction is consummated.
Although our recent sale of assets brought us into conformity with the borrowing base under our Credit Agreement, we remain highly leveraged. In addition, our Credit Agreement matures on April 1, 2014, and no assurances can be made that we will be able to refinance, repay or further extend the maturity date of the Credit Agreement. Also, as of September 30, 2013, we had a working capital deficit of $68.3 million, a retained deficit of $264.6 million and stockholders' deficit of $75.0 million. Depressed natural gas prices in 2012 resulted in significant property impairments and full valuation of our deferred tax assets during 2012. On April 2, 2013, all the indebtedness under our Credit Agreement was reclassified to current liabilities. In addition, our Preferred Stock continues to accrue a dividend of 12.5% per annum, which we have been paying through the issuance of additional shares of Preferred Stock. Beginning in September 2015, dividends on the Preferred Stock will accrue at 9.6% per annum and be payable in cash.
Financial and Operating Results
On June 14, 2013, the Company closed the sale of all of its coal bed methane properties located in the state of Alabama (the "Asset Sale"). The Asset Sale resulted in a $36.9 million gain. The properties sold represented approximately 29% of GeoMet's total production. As such, the current year results are not comparable to the prior year as presented below.
Third Quarter 2013 Financial and Operating Results
For the quarter ended September 30, 2013, GeoMet reported net income of $0.8 million. Included in net income was a $0.6 million gain on natural gas derivatives. For the quarter ended September 30, 2012, GeoMet reported a net loss of $34.4 million. Included in the net loss was a $25.4 million impairment to the Company's gas properties, a $4.8 million loss on natural gas derivatives, and a $1.4 million write off of debt issuance costs.
For the quarter ended September 30, 2013, GeoMet reported net loss available to common stockholders of $1.0 million, or $0.03 per fully diluted share. Included in net income available to common stockholders for the quarter ended September 30, 2013 were non-cash charges of $0.6 million for accretion of preferred stock and $1.3 million for paid-in-kind ("PIK") dividends paid on preferred stock. For the quarter ended September 30, 2012, GeoMet reported a net loss available to common stockholders of $35.8 million, or $0.89 per fully diluted share. Included in the net loss available to common stockholders for the quarter ended September 30, 2012 were charges of $0.5 million for accretion of preferred stock and $0.9 million for PIK dividends on preferred stock.
For the quarter ended September 30, 2013, Adjusted EBITDA decreased $2.3 million to $2.8 million from the prior year quarter of which $1.0 million was directed attributable to the Asset Sale and $2.4 million due to a lower hedged floor, partially offset by a $0.9 million reduction in production costs of the remaining properties. Adjusted EBITDA is a non-GAAP measure. See the accompanying table for a reconciliation of Adjusted EBITDA to Net Income (Loss).
Revenues for the quarter ended September 30, 2013 were $7.4 million, as compared to $9.7 million for the prior year quarter. The average natural gas price for the quarter ended September 30, 2013 was $3.57 per Mcf as compared to the prior year quarter average of $2.83 per Mcf.
Average net gas sales volumes for the quarter ended September 30, 2013 were 22.8 MMcf per day, a 39% decrease from the same quarter in 2012 of which 27% resulted from the Asset Sale on June 14, 2013 and 12% resulted from decreased production related to our remaining properties.
Nine Months Ended September 30, 2013 Financial and Operating Results
For the nine months ended September 30, 2013, GeoMet reported net income of $37.4 million. Included in net income was a $36.9 million non-recurring gain on the sale of our Alabama properties offset by a $0.8 million loss on natural gas derivatives. For the nine months ended September 30, 2012, GeoMet reported a net loss of $141.2 million. Included in the net loss was an $83.5 million impairment of gas properties, a $44.0 million write off of our deferred tax asset, a $1.4 million write off of debt issuance costs, a $1.0 million charge for restructuring costs and a $0.7 million loss on the disposal of our Canadian operations.
For the nine months ended September 30, 2013, GeoMet reported net income available to common stockholders of $32.1 million, or $0.45 per fully diluted share. Included in net income available to common stockholders for the nine months ended September 30, 2013 were non-cash charges of $1.6 million for accretion of preferred stock and $3.7 million for paid-in-kind ("PIK") dividends paid on preferred stock. For the nine months ended September 30, 2012, GeoMet reported a net loss available to common stockholders of $145.4 million, or $3.63 per fully diluted share. Included in the net loss available to common stockholders for the nine months ended September 30, 2012 were charges of $1.4 million for accretion of preferred stock and $2.8 million for PIK dividends on preferred stock.
For the nine months ended September 30, 2013, Adjusted EBITDA decreased $5.2 million to $11.0 million from the prior year period of which $6.6 million was due to a lower hedged floor and $1.2 million was due to the early termination of certain hedges, partially offset by a $1.7 million reduction in production costs of our remaining properties and $0.9 million decrease in restructuring costs. Adjusted EBITDA is a non-GAAP measure. See the accompanying table for a reconciliation of Adjusted EBITDA to Net Income (Loss).
Revenues for the nine months ended September 30, 2013 were $30.4 million, as compared to $27.7 million for the prior year period. The average natural gas price for the nine months ended September 30, 2013 was $3.75 per Mcf as compared to the prior year period average of $2.62 per Mcf.
Average net gas sales volumes for the nine months ended September 30, 2013 were 29.6 MMcf per day, a 22% decrease from the same period in 2012 of which 10% resulted from the sale of our Alabama properties on June 14, 2013 and 12% resulted from decreased production related to our remaining properties.
Forward-Looking Statements Notice
This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Except for statements of historical facts, all statements included in the document, including those preceded by, followed by or that otherwise include the words "believe," "expects," "anticipates," "intends," "estimates," "projects," "target," "goal," "plans," "objective," "should" or similar expressions or variations on such words are forward-looking statements. These forward-looking statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected. Among those risks, trends and uncertainties are volatility of future natural gas prices, our estimate of the sufficiency of our existing capital sources, our ability to raise additional capital to fund cash requirements for future operations, the uncertainties involved in estimating quantities of proved natural gas reserves, reductions in the borrowing base under our credit agreement made by our lenders, in prospect development and property acquisitions and in projecting future rates of production, the timing of development expenditures and drilling of wells, and the operating hazards attendant to the oil and gas business. In particular, careful consideration should be given to cautionary statements made in the various reports the Company has filed with the SEC. GeoMet undertakes no duty to update or revise these forward-looking statements.
About GeoMet, Inc.
GeoMet, Inc. is engaged in the production of natural gas from coal seams ("coalbed methane"). Our core area of operations is the Central Appalachian Basin of Virginia and West Virginia. We also control additional coalbed methane and oil and gas development rights, principally in Virginia, and West Virginia.
| GEOMET, INC. | |||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||
| (In thousands, except per share amounts) | |||||||||||||||||
| Three Months Ended September 30, |
Nine months Ended September 30, |
||||||||||||||||
| 2013 | 2012 | 2013 | 2012 | ||||||||||||||
| Total revenues | $ | 7,413 | $ | 9,665 | $ | 30,429 | $ | 27,655 | |||||||||
| Operating expenses: | |||||||||||||||||
| Production costs | 4,221 | 7,076 | 17,718 | 21,385 | |||||||||||||
| Depreciation, depletion and amortization | 870 | 2,540 | 3,747 | 9,460 | |||||||||||||
| Impairment of gas properties | -- | 25,432 | -- | 83,467 | |||||||||||||
| General, administrative and restructuring | 1,055 | 1,285 | 3,550 | 4,718 | |||||||||||||
| (Gains) losses on natural gas derivatives | (625 | ) | 4,784 | 760 | (341 | ) | |||||||||||
| Total operating expenses | 5,521 | 41,117 | 25,775 | 118,689 | |||||||||||||
| (Loss) gain on the sale of gas properties | (187 | ) | -- | 36,948 | -- | ||||||||||||
| Operating income (loss) | 1,705 | (31,452 | ) | 41,602 | (91,034 | ) | |||||||||||
| Other income (expense): | |||||||||||||||||
| Interest expense, net | (857 | ) | (1,513 | ) | (4,092 | ) | (4,052 | ) | |||||||||
| Write off of debt issuance costs | -- | (1,378 | ) | -- | (1,378 | ) | |||||||||||
| Other | (10 | ) | 1 | (45 | ) | (3 | ) | ||||||||||
| Total other income (expense): | (867 | ) | (2,890 | ) | (4,137 | ) | (5,433 | ) | |||||||||
| Income (loss) before income taxes from continuing operations | 838 | (34,342 | ) | 37,465 | (96,467 | ) | |||||||||||
| Income tax expense | (6 | ) | (6 | ) | (19 | ) | (44,037 | ) | |||||||||
| Income (loss) from continuing operations | 832 | (34,348 | ) | 37,446 | (140,504 | ) | |||||||||||
| Discontinued operations, net of tax | -- | (26 | ) | -- | (722 | ) | |||||||||||
| Net income (loss) | $ | 832 | $ | (34,374 | ) | $ | 37,446 | $ | (141,226 | ) | |||||||
| Accretion of Preferred Stock | (599 | ) | (485 | ) | (1,625 | ) | (1,418 | ) | |||||||||
| Dividends on Preferred Stock | (1,278 | ) | (905 | ) | (3,722 | ) | (2,766 | ) | |||||||||
| Net income (loss) available to common stockholders | $ | (1,045 | ) | $ | (35,764 | ) | $ | 32,099 | $ | (145,410 | ) | ||||||
| Net income (loss) per common share--basic | $ | (0.03 | ) | $ | (0.89 | ) | $ | 0.79 | $ | (3.63 | ) | ||||||
| Net income (loss) per common share--diluted | $ | (0.03 | ) | $ | (0.89 | ) | $ | 0.45 | $ | (3.63 | ) | ||||||
| Weighted average number of common shares: | |||||||||||||||||
| Basic | 40,486 | 40,287 | 40,473 | 40,019 | |||||||||||||
| Diluted | 40,486 | 40,287 | 82,707 | 40,019 | |||||||||||||
| GEOMET, INC. | |||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||
| (In thousands) | |||||||||
| September 30, 2013 | December 31, 2012 | ||||||||
| ASSETS | |||||||||
| Current Assets: | |||||||||
| Cash and cash equivalents | $ | 9,705 | $ | 7,234 | |||||
| Accounts receivable, net | 2,613 | 6,249 | |||||||
| Derivative asset--natural gas contracts | 371 | 3,930 | |||||||
| Other current assets | 941 | 1,701 | |||||||
| Total current assets | 13,630 | 19,114 | |||||||
| Property and equipment--net | 43,516 | 75,125 | |||||||
| Deferred income taxes | 106 | 1,126 | |||||||
| Total other noncurrent assets | 1,101 | 961 | |||||||
| TOTAL ASSETS | $ | 58,353 | $ | 96,326 | |||||
| LIABILITIES, MEZZANINE AND STOCKHOLDERS' DEFICIT | |||||||||
| Current Liabilities: | |||||||||
| Current portion of long-term debt | $ | 74,000 | $ | 10,300 | |||||
| Deferred income taxes | 106 | 1,126 | |||||||
| Derivative liability--natural gas contracts | -- | 920 | |||||||
| Other current liabilities | 7,862 | 11,426 | |||||||
| Total current liabilities | 81,968 | 23,772 | |||||||
| Long-term debt | -- | 129,000 | |||||||
| Asset retirement obligations | 9,491 | 13,235 | |||||||
| Derivative liability--natural gas contracts | 571 | 1,636 | |||||||
| Other long-term accrued liabilities | 121 | 143 | |||||||
| TOTAL LIABILITIES | 92,151 | 167,786 | |||||||
| Series A Convertible Redeemable Preferred Stock | 41,198 | 35,852 | |||||||
| Total stockholders' deficit | (74,996 | ) | (107,312 | ) | |||||
| TOTAL LIABILITIES, MEZZANINE AND STOCKHOLDERS' DEFICIT | $ | 58,353 | $ | 96,326 | |||||
| GEOMET, INC. | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (In thousands) | ||||||||
| 9 Months Ended September 30, |
||||||||
| 2013 | 2012 | |||||||
| Net cash provided by operating activities | $ | 7,604 | $ | 13,595 | ||||
| Net cash (used in) provided by investing activities (1) | 60,172 | 6,295 | ||||||
| Net cash used in financing activities (2) | (65,305 | ) | (13,347 | ) | ||||
| Effect of exchange rates changes on cash | -- | 5 | ||||||
| Increase in cash and cash equivalents | 2,471 | 6,548 | ||||||
| Cash and cash equivalents at beginning of period | 7,234 | 458 | ||||||
| Cash and cash equivalents at end of period | $ | 9,705 | $ | 7,006 | ||||
| (1) | Net cash provided by investing activities for the nine months ended September 30, 2013 primarily consisted of the net proceeds from the sale of Properties in Alabama. Net cash provided by investing activities for the nine months ended September 30, 2012 primarily consisted of return of basis in the settlement of natural gas derivative contracts acquired in a November 2011 asset purchase. |
| (2) | Net cash used in financing activities for the nine months ended September 30, 2013 and 2012 primarily consisted of the net repayment of amounts outstanding under the Credit Agreement. |
| GEOMET, INC. | |||||||||||||
| OPERATING STATISTICS | |||||||||||||
| (in thousands, except per Mcf amounts) | |||||||||||||
| Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||
| 2013 | 2012 | 2013 | 2012 | ||||||||||
| Gas sales | $ | 7,392 | $ | 9,610 | $ | 30,324 | $ | 27,465 | |||||
| Lease operating expenses | $ | 2,023 | $ | 4,417 | $ | 10,615 | $ | 13,350 | |||||
| Compression and transportation expenses | 1,779 | 2,218 | 5,486 | 6,758 | |||||||||
| Production taxes | 419 | 442 | 1,617 | 1,276 | |||||||||
| Total production expenses | $ | 4,221 | $ | 7,077 | $ | 17,718 | $ | 21,384 | |||||
| Net sales volumes (Consolidated) (MMcf) | 2,072 | 3,391 | 8,088 | 10,468 | |||||||||
| Pond Creek field (Central Appalachian Basin) (MMcf) | 1,386 | 1,462 | 4,209 | 4,402 | |||||||||
| Other Central Appalachian Basin fields (MMcf) | 686 | 912 | 2,224 | 2,941 | |||||||||
| Gurnee field (Cahaba Basin) (MMcf) | -- | 430 | 723 | 1,325 | |||||||||
| Black Warrior Basin fields (MMcf) | -- | 587 | 932 | 1,800 | |||||||||
| Per Mcf data ($/Mcf): | |||||||||||||
| Average natural gas sales price realized (Consolidated)(1) | $ | 3.74 | $ | 3.87 | $ | 3.85 | $ | 3.92 | |||||
| Average natural gas sales price (Consolidated) | $ | 3.57 | $ | 2.83 | $ | 3.75 | $ | 2.62 | |||||
| Pond Creek field (Central Appalachian Basin) | $ | 3.60 | $ | 2.88 | $ | 3.78 | $ | 2.70 | |||||
| Other Central Appalachian Basin fields | $ | 3.50 | $ | 2.69 | $ | 3.69 | $ | 2.48 | |||||
| Gurnee field (Cahaba Basin) (2) | $ | -- | $ | 2.87 | $ | 3.77 | $ | 2.63 | |||||
| Black Warrior Basin fields (2) | $ | -- | $ | 2.92 | $ | 3.73 | $ | 2.68 | |||||
| Lease operating expenses (Consolidated) | $ | 0.98 | $ | 1.30 | $ | 1.31 | $ | 1.28 | |||||
| Pond Creek field (Central Appalachian Basin) | $ | 1.07 | $ | 1.13 | $ | 1.12 | $ | 1.07 | |||||
| Other Central Appalachian Basin fields | $ | 0.78 | $ | 1.34 | $ | 1.41 | $ | 1.40 | |||||
| Gurnee field (Cahaba Basin) (2) | $ | -- | $ | 2.79 | $ | 2.84 | $ | 2.67 | |||||
| Black Warrior Basin fields (2) | $ | -- | $ | 0.56 | $ | 0.74 | $ | 0.53 | |||||
| Compression and transportation expenses (Consolidated) | $ | 0.86 | $ | 0.66 | $ | 0.68 | $ | 0.64 | |||||
| Pond Creek field (Central Appalachian Basin) | $ | 0.75 | $ | 0.61 | $ | 0.66 | $ | 0.59 | |||||
| Other Central Appalachian Basin fields | $ | 1.07 | $ | 1.18 | $ | 1.03 | $ | 1.17 | |||||
| Gurnee field (Cahaba Basin) (2) | $ | -- | $ | 0.29 | $ | 0.29 | $ | 0.27 | |||||
| Black Warrior Basin fields (2) | $ | -- | $ | 0.22 | $ | 0.18 | $ | 0.20 | |||||
| Production taxes (Consolidated) | $ | 0.20 | $ | 0.13 | $ | 0.20 | $ | 0.12 | |||||
| Pond Creek field (Central Appalachian Basin) | $ | 0.20 | $ | 0.15 | $ | 0.21 | $ | 0.15 | |||||
| Other Central Appalachian Basin fields | $ | 0.21 | $ | 0.07 | $ | 0.19 | $ | 0.07 | |||||
| Gurnee field (Cahaba Basin) (2) | $ | -- | $ | 0.13 | $ | 0.18 | $ | 0.11 | |||||
| Black Warrior Basin fields (2) | $ | -- | $ | 0.17 | $ | 0.23 | $ | 0.16 | |||||
| Total production expenses (Consolidated) | $ | 2.04 | $ | 2.09 | $ | 2.19 | $ | 2.04 | |||||
| Pond Creek field (Central Appalachian Basin) | $ | 2.02 | $ | 1.89 | $ | 1.99 | $ | 1.81 | |||||
| Other Central Appalachian Basin fields | $ | 2.06 | $ | 2.59 | $ | 2.63 | $ | 2.64 | |||||
| Gurnee field (Cahaba Basin) (2) | $ | -- | $ | 3.21 | $ | 3.31 | $ | 3.05 | |||||
| Black Warrior Basin fields (2) | $ | -- | $ | 0.95 | $ | 1.13 | $ | 0.89 | |||||
| Depletion (Consolidated) | $ | 0.40 | $ | 0.72 | $ | 0.45 | $ | 0.87 | |||||
| (1) | Average natural gas sales price realized includes the effects of realized gains and losses on derivative contracts. |
| (2) | On June 14, 2013, the Company closed the sale of all of its coal bed methane properties located in the state of Alabama. |
| GEOMET, INC. | ||||||
| CONSOLIDATED DERIVATIVE CONTRACT POSITIONS | ||||||
| On October 2, 2013, the Company terminated a portion of its natural gas swap positions. The remaining natural gas swap positions include: | ||||||
| Period | Volume (MMBtu) |
Average Price |
||||
| Fourth Quarter of 2013 | 1,536,000 | $ | 3.74 | |||
| First Quarter of 2014 | 360,000 | $ | 3.82 | |||
| 3,104,000 | ||||||
| At September 30, 2013, we had the following natural gas collar positions: | |||||||||
| Period | Volume (MMBtu) |
Sold Ceiling |
Bought Floor |
||||||
| January 2014 through December 2015 | 3,650,000 | $ | 4.30 | $ | 3.60 | ||||
| January 2014 through December 2015 | 3,650,000 | $ | 4.20 | $ | 3.50 | ||||
| 7,300,000 | |||||||||
| GEOMET, INC. | ||||||||||||||||
| RECONCILIATION OF ADJUSTED EBITDA TO NET INCOME (LOSS) | ||||||||||||||||
| (In thousands) | ||||||||||||||||
| Three Months Ended | Nine months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| Net income (loss) | $ | 832 | $ | (34,374 | ) | $ | 37,446 | $ | (141,226 | ) | ||||||
| Add: Interest expense, net of interest income and amounts capitalized | 857 | 2,890 | 4,092 | 5,430 | ||||||||||||
| Add (Deduct): Other (income) expense | 10 | (1 | ) | 45 | 3 | |||||||||||
| Add: Income tax expense | 6 | 6 | 19 | 44,037 | ||||||||||||
| Add: Impairment of gas properties | -- | 25,432 | -- | 83,467 | ||||||||||||
| Add: Depreciation, depletion and amortization | 870 | 2,540 | 3,747 | 9,460 | ||||||||||||
| (Deduct) Add: Unrealized (gains) losses on derivative contracts | (264 | ) | 8,280 | 1,574 | 13,259 | |||||||||||
| Add (Deduct): Loss (gain) on the sale of the Alabama properties | 187 |
-- |
(36,948 |
) | -- | |||||||||||
| Add: Loss on the sale Hudson's Hope Gas, Ltd. | -- | -- | -- | 683 | ||||||||||||
| Add: Stock based compensation | 69 | 120 | 188 | 513 | ||||||||||||
| Add: Accretion expense - asset retirement obligations | 210 | 193 | 823 | 585 | ||||||||||||
| Adjusted EBITDA | $ | 2,777 | $ | 5,086 | $ | 10,986 | $ | 16,211 | ||||||||
The table above reconciles Adjusted EBITDA to net income (loss). Adjusted EBITDA is defined as net income (loss) before net interest expense, other non-operating (income) expense, income taxes, depreciation, depletion, amortization, impairment of gas properties, unrealized (gains) losses on natural gas derivative contracts, Gain on the sale of the Alabama properties, 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 cash flows and operating performance.
Contact Information:
For more information please contact
Stephen M. Smith
(713) 287-2251
www.geometinc.com