GEOMET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
Revenues:
Gas sales $ 7,661 $ 6,838 $ 17,545 $ 16,290
Operating fees and other 71 77 145 175
---------- ---------- ---------- ----------
Total revenues 7,732 6,915 17,690 16,465
Expenses:
Total production expenses 4,176 4,954 8,495 11,339
Depreciation, depletion and
amortization 1,450 1,982 3,096 5,018
Impairment of gas
properties -- 27,582 -- 167,295
General and administrative 1,315 2,181 2,793 5,154
Terminated transaction
costs 1,403 -- 1,403 --
Realized gains on derivative
contracts (2,211) (2,734) (3,671) (5,457)
Unrealized losses (gains) on
derivative contracts 2,974 2,144 (4,668) 1,958
---------- ---------- ---------- ----------
Total operating expenses 9,107 36,109 7,448 185,307
Operating (loss) income (1,375) (29,194) 10,242 (168,842)
Other expenses
& interest, net (1,418) (1,404) (2,654) (2,378)
---------- ---------- ---------- ----------
(Loss) income before income
taxes (2,793) (30,598) 7,588 (171,220)
Income tax benefit
(expense) 1,031 11,212 (3,323) 64,108
---------- ---------- ---------- ----------
Net (loss) income $ (1,762) $ (19,386) $ 4,265 $ (107,112)
========== ========== ========== ==========
(Loss) income per share:
Net (loss) income
Basic $ (0.04) $ (0.50) $ 0.11 $ (2.75)
========== ========== ========== ==========
Diluted $ (0.04) $ (0.50) $ 0.11 $ (2.75)
========== ========== ========== ==========
Weighted average number of
common shares:
Basic 39,241 39,123 39,200 39,024
========== ========== ========== ==========
Diluted 39,241 39,123 39,291 39,024
========== ========== ========== ==========
GEOMET, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, December 31,
2010 2009
------------ ------------
Assets:
Current assets $ 11,854 $ 9,054
Properties and equipment, net of accumulated
depreciation, depletion, amortization and
impairment of gas properties 100,530 98,698
Deferred income taxes 49,712 51,805
Other assets 2,162 1,371
------------ ------------
Total assets $ 164,258 $ 160,928
============ ============
Liabilities and stockholders' equity:
Current liabilities $ 11,033 $ 9,089
Long-term debt 116,406 119,996
Other long-term liabilities 5,184 4,935
------------ ------------
Total liabilities 132,623 134,020
------------ ------------
Total stockholders' equity 31,635 26,908
------------ ------------
Total liabilities and stockholders' equity $ 164,258 $ 160,928
============ ============
GEOMET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended
June 30,
----------------
2010 2009
------- -------
Net cash provided by operating activities $ 8,475 $ 3,243
Net cash used in investing activities (4,061) (9,302)
Net cash (used in) provided by financing activities (4,906) 5,173
Effect of exchange rates changes on cash 12 10
------- -------
Decrease in cash and cash equivalents (480) (876)
Cash and cash equivalents at beginning of period 974 2,097
------- -------
Cash and cash equivalents at end of period $ 494 $ 1,221
======= =======
GEOMET, INC.
OPERATING STATISTICS
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -------------------
2010 2009 2010 2009
--------- -------- --------- ---------
Net sales volumes (MMcf) 1,824 1,903 3,644 3,790
Per Mcf data ($/Mcf):
Average natural gas sales price $ 4.20 $ 3.59 $ 4.81 $ 4.30
Differential to NYMEX (1) $ 0.11 $ (0.04) $ 0.12 $ 0.04
Average natural gas sales price
realized (2) $ 5.41 $ 5.03 $ 5.82 $ 5.74
Adjusted lease operating expense
(3)(4) $ 1.50 $ 1.72 $ 1.58 $ 2.04
Compression expenses $ 0.42 $ 0.50 $ 0.40 $ 0.47
Transportation expense $ 0.17 $ 0.22 $ 0.18 $ 0.27
Production taxes $ 0.16 $ 0.13 $ 0.14 $ 0.16
Total production expenses, as
adjusted (3) $ 2.25 $ 2.57 $ 2.30 $ 2.94
Depletion $ 0.72 $ 0.96 $ 0.78 $ 1.24
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -------------------
2010 2009 2010 2009
--------- -------- --------- ---------
POND CREEK FIELD
Net sales volumes (MMcf) 1,319 1,312 2,614 2,603
Per Mcf data ($/Mcf):
Lease operating expense $ 1.27 $ 1.14 $ 1.30 $ 1.44
Compression expense $ 0.42 $ 0.41 $ 0.38 $ 0.36
Transportation expense $ 0.23 $ 0.31 $ 0.24 $ 0.38
Production taxes $ 0.15 $ 0.10 $ 0.16 $ 0.13
Total production expenses $ 2.07 $ 1.96 $ 2.08 $ 2.31
GURNEE FIELD
Net sales volumes (MMcf) 466 537 941 1,109
Per Mcf data ($/Mcf):
Adjusted lease operating expense
(3)(4) $ 2.12 $ 2.60 $ 2.05 $ 2.75
Compression expense $ 0.38 $ 0.58 $ 0.38 $ 0.52
Production taxes (5) $ 0.20 $ 0.18 $ 0.06 $ 0.59
Total production expenses, as
adjusted (3) $ 2.70 $ 3.36 $ 2.49 $ 3.86
(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 serve
to offset operating expenses. See Reconciliation of Adjusted Lease
Operating Expense.
(4) The decrease in adjusted lease operating expense since prior year is
primarily due to a company-wide cost reduction strategy implemented
in April 2009.
(5) The decrease in production taxes per Mcf for the six months ended June
30, 2010 was due to a refund received in March 2010 for production
taxes related to our Gurnee field.
GEOMET, INC.
CONSOLIDATED DERIVATIVE CONTRACT POSITIONS
At June 30, 2010, the Company had the following natural gas collar
positions:
Volume Sold Bought Sold
Period (MMBtu) Ceiling Floor Floor
--------- --------- --------- ---------
July through October 2010 492,000 $ 6.80 $ 5.50 $ 3.50
July through October 2010 492,000 $ 6.35 $ 5.50 -
November 2010 through March 2011 604,000 $ 7.45 $ 6.50 -
---------
1,588,000
=========
At June 30, 2010, the Company had the following natural gas swap positions:
Volume
Period (MMBtu) Price
--------- ---------
July through October 2010 492,000 $ 5.70
July through October 2010 369,000 $ 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
April 2011 through October 2011 856,000 $ 5.37
April 2011 through October 2011 856,000 $ 5.43
November 2011 through March 2012 608,000 $ 7.12
November 2011 through March 2012 608,000 $ 6.12
April 2012 through October 2012 856,000 $ 5.73
November 2012 through March 2013 604,000 $ 6.42
---------
7,615,000 $ 6.42
=========
At June 30, 2010, the Company had the following interest rate swap
positions:
Effective Designated Fixed Notional
Description date maturity date rate(1) amount
---------- ------------ ---------- ------------
Floating-to-fixed swap 12/14/2007 12/14/2010 3.86% $ 15,000,000
Floating-to-fixed swap 1/6/2009 1/6/2011 1.38% $ 5,000,000
------------
$ 20,000,000
============
(1) The floating rate paid by the counterparty is the British Bankers'
Association LIBOR rate.
GEOMET, INC.
RECONCILIATION OF ADJUSTED EBITDA TO NET (LOSS) INCOME
(In thousands)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2010 2009 2010 2009
-------- --------- ------- ----------
Net (loss) income $ (1,762) $ (19,386) $ 4,265 $ (107,112)
Add: Interest expense, net of
interest income and amounts
capitalized 1,419 1,413 2,637 2,386
Add (Deduct): Other (income)
expense (1) (9) 17 (8)
Add (Deduct): Income tax
(benefit) expense (1,031) (11,212) 3,323 (64,108)
Add : Depreciation, depletion
and amortization 1,450 1,982 3,096 5,018
Add: Impairment of gas properties -- 27,582 -- 167,295
Add: Unrealized losses (gains) on
derivative contracts 2,974 2,144 (4,668) 1,958
Add: Stock based compensation 90 189 80 501
Add: Accretion expense 121 105 241 213
-------- --------- ------- ----------
Adjusted EBITDA $ 3,260 $ 2,808 $ 8,991 $ 6,143
======== ========= ======= ==========
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 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 INCOME (LOSS) TO NET (LOSS) INCOME
(In thousands)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2010 2009 2010 2009
-------- --------- ------- ----------
Net (loss) income $ (1,762) $ (19,386) $ 4,265 $ (107,112)
Impairment of gas properties -- 27,582 -- 167,295
Unrealized losses (gains) on
derivative contracts, net of tax 2,974 2,144 (4,668) 1,958
Terminated transaction costs 1,403 -- 1,403 --
Effect of income taxes (1,672) (11,164) 1,247 (63,952)
-------- --------- ------- ----------
Adjusted Net Income (Loss) $ 943 $ (824) $ 2,247 $ (1,811)
======== ========= ======= ==========
The table above reconciles net (loss) income to Adjusted Net Income (Loss).
Adjusted Net Income (Loss) is calculated by eliminating unrealized losses
(gains) on derivative contracts from net (loss) income, impairments to our
gas properties, terminated transaction costs, 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) income 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 losses (gains) relate to derivative contracts that hedge our
production in future months. The gains associated with derivative contracts
that hedge current production are recognized in net (loss) income and are
not eliminated in determining Adjusted Net Income (Loss). 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 Six Months Ended
June 30, June 30,
------------------- -------------------
2010 2009 2010 2009
--------- --------- --------- ---------
Lease operating expense $ 2,813 $ 3,348 $ 5,920 $ 7,918
Deduct: Produced water disposal
fees 71 77 145 175
--------- --------- --------- ---------
Adjusted lease operating expense $ 2,742 $ 3,271 $ 5,775 $ 7,743
========= ========= ========= =========
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 serve to offset operating expenses. 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