HOUSTON, TX--(Marketwire - February 8, 2011) - GeoMet, Inc. (
Estimated Proved Reserves
Estimated proved natural gas reserves as of December 31, 2010 prepared by DeGolyer and MacNaughton, independent petroleum engineers, totaled approximately 216 billion cubic feet (Bcf), a 7 Bcf (3%) increase over year-end 2009 reserves. The Company replaced approximately 200% of its net gas sales volumes for the year. The present value of future net cash flows attributable to proved reserves, discounted at 10%, was approximately $126 million at December 31, 2010 as compared to approximately $98 million at December 31, 2009. A price of $4.49 per Mcf was used at December 31, 2010 versus $4.06 per Mcf at year-end 2009. The Company's estimated proved reserves at December 31, 2010 are 100% coalbed methane and 76% developed. Approximately 64% of total year-end 2010 proved reserves are in the Pond Creek and Lasher fields in West Virginia and Virginia, and 36% are in the Gurnee field in Alabama. The reserve increase resulted primarily from development drilling in the Pond Creek field and the higher natural gas price used in the year-end 2010 estimate and, to a small extent, improved recovery factors in six Gurnee field wells where a new hydraulic fracturing technique was used to complete a behind pipe coal group during the last two years.
2010 Operational Update
Fourth quarter 2010 net gas sales volumes averaged approximately 20.3 million cubic feet (MMcf) per day, an increase of approximately 1% as compared to both the fourth quarter of 2009 and the third quarter of 2010. For the full year 2010, net gas sales volumes averaged approximately 20.2 MMcf per day, a decline of approximately 2.5% from the prior year. Fourth quarter 2010 net gas sales volumes were adversely impacted by a leak in the Company's low pressure gathering system in the Pond Creek field which is estimated to have resulted in approximately 0.3 MMcf per day of lost sales volumes for the quarter. This leak was repaired in late December. Current net gas sales volumes are approximately 20.7 MMcf per day.
During 2010, 19 new wells were added to sales, with 16 wells added in the last half of the year. All of these new wells were drilled in the Virginia portion of the Pond Creek field. These wells are currently producing at rates approximately equal to the current field wide average production rate and are expected to continue to incline to peak rates significantly higher than the current field wide average production rate.
In our Gurnee field, a behind pipe coal group was completed in 4 wells using a new fracturing technique that the Company has been testing since late 2009. The results yielded incremental new production from this single coal group of about 218 Mcf per day, a 130% increase from the pre-fracture production rates from the 4 wells. A similar fracturing technique was also used to complete a deep coal group in a new well drilled in late 2010. The initial daily water production from this coal group is encouraging but without significant gas production to date, it is too early to quantify the economic results of the completion at this time. Fracturing of the remaining coal groups in the well will be conducted in the first quarter of 2011.
The Company estimates that its fourth quarter 2010 gas price realizations (including the impact of hedging) averaged $5.78 per Mcf. This represents an 8% increase from the prior year period and a 14% increase versus third quarter 2010. For the full year, gas price realizations (including the impact of hedging) averaged $5.72 per Mcf, an increase of approximately 5% from the prior year.
2010 Capital Expenditures and Guidance for 2011
GeoMet's capital expenditures for 2010 were approximately $14 million (inclusive of capitalized overhead and certain other non-cash charges). The company has established a capital expenditure budget of approximately $14 million for 2011 (including capitalized overhead and certain other non-cash charges).
In 2010, the Company spent approximately $10.7 million to drill 20 new wells in the Virginia portion of its Pond Creek field. The Company has allocated approximately $9.5 million of its 2011 capital budget to drill another 20 wells in this area. In 2010, the Company spent approximately $1.8 million to test its new hydraulic fracturing technique in the Gurnee field in Alabama, drilling one new well and fracing previously uncompleted coal seams in 4 existing wells. The Company intends to spend approximately $2.7 million in the Gurnee field in 2011 to drill and complete 4 new wells in order to continue testing this new hydraulic fracturing technique.
The Company's 2011 capital expenditures are expected to be funded from internally generated cash flows.
Hedging Update
The Company recently completed a forward sale of net volumes of approximately 3.3 MMcf per day for the period April through October 2011 at a price of $4.92 per Mcf and net volumes of approximately 2.5 MMcf per day for the period November 2011 through March 2012 at a price of $5.33 per Mcf. Following the addition of these forward sales, the Company estimates that approximately 72% of its 2011 production is hedged at an average price of $5.91 per Mcf and approximately 56% of its 2012 production is hedged at an average price of $5.50 per Mcf.
Commenting on these announcements, J. Darby Seré, GeoMet's Chairman and Chief Executive Officer, said, "We did not drill any new wells during 2009 and all but 3 of the wells driiled in 2010 went on line after mid-July, most in the fourth quarter. The fact that we were able to increase reserves and hold production declines to approximately 2.5% in 2010 is a reflection of the long lived, shallow decline nature of our asset base. We expect to achieve growth in net gas sales volumes in 2011 and 2012 just from our drilling in the Pond Creek field."
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, which have been depressed recently, 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, 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 an independent energy company primarily engaged in the exploration for and development and production of natural gas from coal seams ("coalbed methane") and non-conventional shallow gas. Our principal operations and producing properties are located in the Cahaba Basin in Alabama and the Central Appalachian Basin in West Virginia and Virginia. We also control coalbed methane and oil and gas development rights, principally in Alabama, British Columbia, Virginia, and West Virginia.
Contact Information:
For more information please contact
Steve Smith
(713) 287-2251
www.geometinc.com