GEOMET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months Ended
March 31,
-------------------------------
2009 2008
--------------- ---------------
Revenues:
Gas sales $ 9,453 $ 15,581
Operating fees and other 98 298
--------------- ---------------
Total revenues 9,551 15,879
Expenses:
Total production expenses 6,386 5,216
Depreciation, depletion and amortization 3,037 2,459
Impairment of gas properties 139,713 --
General and administrative 2,973 2,493
Realized gains on derivative contracts (2,723) (862)
Unrealized (gains) losses on derivative
contracts (186) 8,647
--------------- ---------------
Total operating expenses 149,200 17,953
--------------- ---------------
Operating loss (139,649) (2,074)
Other expenses & interest, net (974) (1,302)
--------------- ---------------
Loss before income taxes (140,623) (3,376)
Income tax (benefit) expense (52,897) 1,234
--------------- ---------------
Net loss $ (87,726) $ (2,142)
=============== ===============
Loss per share:
Net loss
Basic $ (2.25) $ (0.05)
=============== ===============
Diluted $ (2.25) $ (0.05)
=============== ===============
Weighted average number of common
shares:
Basic 38,924 39,004
=============== ===============
Diluted 38,924 39,004
=============== ===============
GEOMET, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31,
2009 2008
--------- ---------
Assets:
Current assets $ 15,142 $ 17,938
Properties and equipment, net of accumulated
depreciation, depletion, amortization and
impairment of gas properties 218,827 358,299
Other assets 9,809 1,363
--------- ---------
Total assets $ 243,778 $ 377,600
========= =========
Liabilities and stockholders' equity:
Current liabilities $ 12,428 $ 19,379
Long-term debt 121,554 117,118
Other long-term liabilities 4,808 48,671
--------- ---------
Total liabilities 138,790 185,168
--------- ---------
Total stockholders' equity 104,988 192,432
--------- ---------
Total liabilities and stockholders' equity $ 243,778 $ 377,600
========= =========
GEOMET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended
March 31,
---------------------
2009 2008
---------- ----------
Net cash provided by operating activities $ 2,193 $ 3,846
Net cash used in investing activities (7,131) (7,210)
Net cash provided by financing activities 4,441 4,514
Effect of exchange rates changes on cash (56) 144
---------- ----------
(Decrease) increase in cash and cash equivalents (553) 1,294
Cash and cash equivalents at beginning of period 2,097 1,541
---------- ----------
Cash and cash equivalents at end of period $ 1,544 $ 2,835
========== ==========
GEOMET, INC.
OPERATING STATISTICS
Three Months
Ended
--------------
2009 2008
------ ------
Net sales volumes (MMcf) 1,887 1,871
Per Mcf data ($/Mcf):
Average natural gas sales price $ 5.01 $ 8.33
Differential to NYMEX (1) $ 0.11 $ 0.30
Average natural gas sales price realized (2) $ 6.45 $ 8.79
Adjusted lease operating expense (3) $ 2.37 $ 1.85
Compression expenses $ 0.44 $ 0.37
Transportation expense $ 0.33 $ 0.19
Production taxes $ 0.19 $ 0.23
Total production expenses, as adjusted (3) $ 3.33 $ 2.64
Depreciation, depletion and amortization $ 1.61 $ 1.31
POND CREEK FIELD
Three Months
Ended
--------------
2009 2008
------ ------
Net sales volumes (MMcf) 1,291 1,223
Per Mcf data ($/Mcf):
Lease operating expense $ 1.76 $ 1.61
Compression expense $ 0.31 $ 0.35
Transportation expense $ 0.46 $ 0.28
Production taxes $ 0.15 $ 0.08
Total production expenses $ 2.68 $ 2.32
GURNEE FIELD
Three Months
Ended
--------------
2009 2008
------ ------
Net sales volumes (MMcf) 557 559
Per Mcf data ($/Mcf):
Adjusted lease operating expense (3) $ 2.98 $ 2.65
Compression expense $ 0.59 $ 0.48
Production taxes $ 0.31 $ 0.51
Total production expenses, as adjusted (3) $ 3.88 $ 3.64
(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.
GEOMET, INC.
CONSOLIDATED DERIVATIVE CONTRACT POSITIONS
At March 31, 2009, the Company had the following natural gas collar
positions:
Volume Sold Bought Sold
Period (MMBtu) Ceiling Floor Floor
--------- ------- ------ ------
April through October 2009 1,284,000 $ 10.00(1) $ 7.50 $ 5.25
April through October 2009 1,284,000 $ 10.00(1) $ 8.50 $ 6.50
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
On May 6, 2009, the Company entered into the following natural gas collar
position:
Volume Sold Bought
Period (MMBtu) Ceiling Floor
--------- ------- ------
June through October 2009 (1) 1,836,000 $ 4.50 $ 3.70
(1) In connection with the natural gas collar entered into on May 6,
2009, the Company eliminated the existing $10.00 sold ceilings with
respect to all three-way-collars for the period April through October
2009.
At March 31, 2009, the Company had the following natural gas swap position:
Volume
Period (MMBtu) Price
------- -------
April through October 2009 856,000 $ 4.47
At March 31, 2009, the Company had the following interest rate swap
positions:
Designate Fixed Notational
Description Effective date maturity 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.
GEOMET, INC.
RECONCILIATION OF ADJUSTED EBITDA TO NET LOSS
(In thousands)
Three Months Ended
March 31,
-------------------------------
2009 2008
-------------- --------------
Net loss $ (87,726) $ (2,142)
Add: Interest expense, net of interest
income and amounts capitalized 973 1,296
Add: Other expense 1 6
(Deduct): Income tax benefit (52,897) (1,234)
Add: Depreciation, depletion and
amortization 3,037 2,459
Add: Impairment of gas properties 139,713 -
(Deduct) Add: Unrealized (gains) losses on
derivative contracts (186) 8,647
Add: Stock based compensation 312 188
Add: Accretion expense 107 84
-------------- --------------
Adjusted EBITDA $ 3,334 $ 9,304
============== ==============
The table above reconciles net loss to Adjusted EBITDA. Adjusted EBITDA is
defined as net loss before net interest expense, other non-operating income
or losses, income taxes, depreciation, depletion and amortization, and
minority interest before unrealized (gains) losses 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
(In thousands)
Three Months Ended
March 31,
--------------------------
2009 2008
------------ ----------
Net loss $ (87,726) $ (2,142)
Impairment of gas properties 139,713 -
Unrealized (gains) losses on
derivative contracts, net of tax (186) 8,647
Effect of income taxes (52,787) (3,303)
------------ ----------
Adjusted Net (Loss) Income $ (986) $ 3,202
============ ==========
The table above reconciles net loss to Adjusted Net (Loss) Income. Adjusted
Net (Loss) Income is calculated by eliminating unrealized (gains) losses on
derivative contracts from net loss, non-cash 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 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 (gains) losses relates to derivative
contracts that hedge our production in future months. The (gains) losses
associated with derivative contracts that hedge current production are
recognized in net loss and are not eliminated in determining Adjusted Net
(Loss) Income. The adjustment better matches (gains) losses 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
March 31,
---------------
2009 2008
------- -------
Lease operating expense $ 4,569 $ 3,751
Deduct: Produced water disposal fees 98 297
------- -------
Adjusted lease operating expense $ 4,471 $ 3,454
======= =======
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: Contacts: Stephen M. Smith (713) 287-2251 John Baldissera BPC Financial (800) 368-1217 www.geometinc.com