GEOMET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------- ----------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Revenues:
Gas sales $ 7,913 $ 13,358 $ 30,597 $ 68,314
Operating fees and other 95 133 367 780
---------- ---------- ---------- ----------
Total revenues 8,008 13,491 30,964 69,094
Expenses:
Total production expenses 4,106 5,692 20,125 21,392
Depreciation, depletion and
amortization 1,842 3,117 12,030 10,589
Impairment of gas
properties 20,848 50,734 257,288 50,734
General and administrative 1,343 1,891 8,349 9,368
Realized (gains) losses on
derivative contracts (2,068) (1,521) (10,694) 500
Unrealized (gains) losses
on derivative contracts (1,530) (4,173) 3,995 (4,993)
---------- ---------- ---------- ----------
Total operating expenses 24,541 55,740 291,093 87,590
Operating loss (16,533) (42,249) (260,129) (18,496)
Other expenses & interest,
net (1,393) (1,247) (5,147) (4,703)
---------- ---------- ---------- ----------
Loss before income taxes (17,926) (43,496) (265,276) (23,199)
Income tax benefit 6,247 8,847 98,142 712
---------- ---------- ---------- ----------
Net loss $ (11,679) $ (34,649) $ (167,134) $ (22,487)
========== ========== ========== ==========
Loss per share:
Net loss
Basic $ (0.30) $ (0.89) $ (4.28) $ (0.58)
========== ========== ========== ==========
Diluted $ (0.30) $ (0.89) $ (4.28) $ (0.58)
========== ========== ========== ==========
Weighted average number of
common shares:
Basic 39,148 38,885 39,085 38,857
========== ========== ========== ==========
Diluted 39,148 38,885 39,085 38,857
========== ========== ========== ==========
GEOMET, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, December 31,
2009 2008
------------ ------------
Assets:
Current assets $ 9,054 $ 17,938
Properties and equipment, net of accumulated
depreciation, depletion, amortization and
impairment of gas properties 98,698 358,299
Deferred income taxes 51,805 --
Other assets 1,371 1,363
------------ ------------
Total assets $ 160,928 $ 377,600
============ ============
Liabilities and stockholders' equity:
Current liabilities $ 9,089 $ 19,379
Long-term debt 119,996 117,118
Deferred income taxes -- 43,842
Other long-term liabilities 4,935 4,829
------------ ------------
Total liabilities 134,020 185,168
------------ ------------
Total stockholders' equity 26,908 192,432
------------ ------------
Total liabilities and stockholders' equity $ 160,928 $ 377,600
============ ============
GEOMET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Twelve Months Ended
December 31,
--------------------
2009 2008
--------- ---------
Net cash provided by operating activities $ 8,518 $ 32,958
Net cash used in investing activities (12,696) (52,719)
Net cash provided by financing activities 2,888 20,493
Effect of exchange rates changes on cash 167 (176)
--------- ---------
(Decrease) increase in cash and cash equivalents (1,123) 556
Cash and cash equivalents at beginning of period 2,097 1,541
--------- ---------
Cash and cash equivalents at end of period $ 974 $ 2,097
========= =========
GEOMET, INC.
OPERATING STATISTICS
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------- -------------------
2009 2008 2009 2008
--------- --------- --------- ---------
Net sales volumes (MMcf) 1,858 1,906 7,549 7,453
Per Mcf data ($/Mcf):
Average natural gas sales price $ 4.26 $ 7.01 $ 4.05 $ 9.17
Differential to NYMEX (1) $ 0.09 $ 0.07 $ 0.07 $ 0.16
Average natural gas sales price
realized (2) $ 5.37 $ 7.81 $ 5.47 $ 9.10
Adjusted lease operating expense
(3)(4) $ 1.47 $ 1.98 $ 1.80 $ 1.88
Compression expense $ 0.35 $ 0.42 $ 0.44 $ 0.41
Transportation expense $ 0.17 $ 0.27 $ 0.22 $ 0.19
Production taxes $ 0.17 $ 0.25 $ 0.16 $ 0.29
Total production expenses, as
adjusted (3) $ 2.16 $ 2.92 $ 2.62 $ 2.77
Depletion $ 0.92 $ 1.55 $ 1.51 $ 1.35
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------- -------------------
2009 2008 2009 2008
--------- --------- --------- ---------
POND CREEK FIELD
Net sales volumes (MMcf) 1,306 1,300 5,226 5,003
Per Mcf data ($/Mcf):
Lease operating expense $ 1.37 $ 1.56 $ 1.38 $ 1.54
Compression expense $ 0.32 $ 0.43 $ 0.36 $ 0.39
Transportation expense $ 0.24 $ 0.40 $ 0.31 $ 0.29
Production taxes $ 0.15 $ 0.18 $ 0.13 $ 0.15
Total production expenses $ 2.08 $ 2.57 $ 2.18 $ 2.37
GURNEE FIELD
Net sales volumes (MMcf) 498 574 2,118 2,241
Per Mcf data ($/Mcf):
Adjusted lease operating expense
(3) $ 1.39 $ 2.46 $ 2.29 $ 2.63
Compression expense $ 0.28 $ 0.36 $ 0.49 $ 0.48
Production taxes $ 0.25 $ 0.42 $ 0.23 $ 0.56
Total production expenses, as
adjusted (3) $ 1.92 $ 3.24 $ 3.01 $ 3.67
(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 and
losses on derivative contracts.
(3) Produced water disposal fees are recorded as operating fees and other
on the Statements 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 December 31, 2009, the Company had the following natural gas collar
positions:
Volume Sold Bought Sold
Period (MMBtu) Ceiling Floor Floor
------- ------- ------- -------
January 2010 through March 2010 540,000 $ 11.20 $ 9.50 $ 7.00
January 2010 through March 2010 360,000 $ 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 $ -
At December 31, 2009, the Company had the following natural gas swap
positions:
Volume
Period (MMBtu) Price
------- -------
April through October 2010 856,000 $ 5.70
April through October 2010 642,000 $ 6.30
November 2010 through March 2011 604,000 $ 6.67
November 2010 through March 2011 906,000 $ 7.27
April 2011 through October 2011 856,000 $ 6.37
November 2011 through March 2012 608,000 $ 7.12
At December 31, 2009, the Company had the following interest rate swap
positions:
Effective Designated Fixed Notional
Description 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 Twelve Months Ended
December 31, December 31,
---------------------- ----------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Net loss $ (11,679) $ (34,649) $ (167,134) $ (22,487)
Add: Interest expense, net
of interest income and
amounts capitalized 1,380 1,237 5,146 4,739
Add (Deduct): Other
expense (income) 13 10 1 (36)
(Deduct): Income tax
benefit (6,247) (8,847) (98,142) (712)
Add: Depreciation,
depletion and
amortization 1,842 3,117 12,030 10,589
Add: Impairment of gas
properties 20,848 50,734 257,288 50,734
Add: Unrealized (gains)
losses on derivative
contracts (1,530) (4,173) 3,995 (4,993)
Add: Stock based
compensation 131 81 793 566
Add: Accretion expense 108 107 432 365
---------- ---------- ---------- ----------
Adjusted EBITDA $ 4,866 $ 7,617 $ 14,409 $ 38,765
========== ========== ========== ==========
The table above reconciles net loss to Adjusted EBITDA. Adjusted EBITDA is
defined as net loss before net interest expense, other non-operating
income, income taxes, depreciation, depletion and amortization, and
impairment of gas properties 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 INCOME (LOSS) TO NET LOSS
(In thousands)
Three Months Ended Twelve Months Ended
December 31, December 31,
-------------------- --------------------
2009 2008 2009 2008
--------- --------- --------- ---------
Net loss $ (11,679) $ (34,649) $(167,134) $ (22,487)
Impairment of gas properties 20,848 50,734 257,288 50,734
Unrealized (gains) losses on
derivative contracts, net of
tax (1,530) (4,173) 3,995 (4,993)
Accelerated depletion - Canada -- -- 2,742 --
Effect of income taxes (7,444) (10,494) (99,154) (10,181)
--------- --------- --------- ---------
Adjusted Net Income (Loss) $ 195 $ 1,418 $ (2,263) $ 13,073
========= ========= ========= =========
The table above reconciles net loss to Adjusted Net Income (Loss). Adjusted
Net Income (Loss) is calculated by eliminating unrealized (gains) losses on
derivative contracts from net loss, non-cash accelerated depletion and
impairments to our gas properties, and their related tax effects to arrive
at Adjusted Net Income (Loss). 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 Income (Loss), 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 Income (Loss) is a non-GAAP
measure, we believe it is useful information for investors because the
unrealized (gains) losses relate 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 Income (Loss). 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 Twelve Months Ended
December 31, December 31,
------------------- -------------------
2009 2008 2009 2008
--------- --------- --------- ---------
Lease operating expense $ 2,822 $ 3,890 $ 13,935 $ 14,757
Deduct: Produced water disposal
fees 95 133 367 780
--------- --------- --------- ---------
Adjusted lease operating expense $ 2,727 $ 3,757 $ 13,568 $ 13,977
========= ========= ========= =========
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 Statements 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 at (713) 287-2251 (), John Baldissera with BPC Financial at (800) 368-1217, or visit our website at www.geometinc.com