GEOMET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Revenues:
Gas sales $ 6,838 $ 20,701 $ 16,290 $ 36,282
Operating fees and other 77 203 175 501
---------- ---------- ---------- ----------
Total revenues 6,915 20,904 16,465 36,783
Expenses:
Total production expenses 4,954 5,280 11,339 10,495
Depreciation, depletion and
amortization 1,982 2,489 5,018 4,949
Impairment of gas
properties 27,582 -- 167,295 --
General and administrative 2,181 2,887 5,154 5,380
Realized (gains) losses on
derivative contracts (2,734) 1,493 (5,457) 631
Unrealized losses on
derivative contracts 2,144 12,098 1,958 20,745
---------- ---------- ---------- ----------
Total operating expenses 36,109 24,247 185,307 42,200
---------- ---------- ---------- ----------
Operating loss (29,194) (3,343) (168,842) (5,417)
Other expenses & interest,
net (1,404) (1,069) (2,378) (2,371)
---------- ---------- ---------- ----------
Loss before income taxes (30,598) (4,412) (171,220) (7,788)
Income tax benefit 11,212 1,235 64,108 2,469
---------- ---------- ---------- ----------
Net loss $ (19,386) $ (3,177) $ (107,112) $ (5,319)
========== ========== ========== ==========
Loss per share:
Net loss
Basic $ (0.50) $ (0.08) $ (2.75) $ (0.14)
========== ========== ========== ==========
Diluted $ (0.50) $ (0.08) $ (2.75) $ (0.14)
========== ========== ========== ==========
Weighted average number of
common shares:
Basic 39,123 39,271 39,024 39,140
========== ========== ========== ==========
Diluted 39,123 39,271 39,024 39,140
========== ========== ========== ==========
GEOMET, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, December 31,
2009 2008
------------ ------------
Assets:
Current assets $ 12,044 $ 17,938
Properties and equipment, net of accumulated
depreciation, depletion, amortization and
impairment of gas properties 191,711 358,299
Other assets 20,077 1,363
------------ ------------
Total assets $ 223,832 $ 377,600
============ ============
Liabilities and stockholders' equity:
Current liabilities $ 10,518 $ 19,379
Long-term debt 122,285 117,118
Other long-term liabilities 4,890 48,671
------------ ------------
Total liabilities 137,693 185,168
------------ ------------
Total stockholders' equity 86,139 192,432
------------ ------------
Total liabilities and stockholders' equity $ 223,832 $ 377,600
============ ============
GEOMET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended
June 30,
------------------
2009 2008
-------- --------
Net cash provided by operating activities $ 3,243 $ 17,574
Net cash used in investing activities (9,302) (18,549)
Net cash provided by (used in) financing activities 5,173 3,482
Effect of exchange rates changes on cash 10 (11)
-------- --------
(Decrease) increase in cash and cash equivalents (876) 2,496
Cash and cash equivalents at beginning of period 2,097 1,540
-------- --------
Cash and cash equivalents at end of period $ 1,221 $ 4,036
======== ========
GEOMET, INC.
OPERATING STATISTICS
Three Months Six Months
Ended Ended
June 30, June 30,
----------------- -----------------
2009 2008 2009 2008
------- -------- -------- --------
Net sales volumes (MMcf) 1,903 1,856 3,790 3,727
Per Mcf data ($/Mcf):
Average natural gas sales price $ 3.59 $ 11.15 $ 4.30 $ 9.73
Differential to NYMEX (1) $ (0.04) $ 0.23 $ 0.04 $ 0.25
Average natural gas sales price
realized (2) $ 5.03 $ 10.35 $ 5.74 $ 9.57
Adjusted lease operating expense (3) $ 1.72 $ 1.85 $ 2.04 $ 1.85
Compression expenses $ 0.50 $ 0.40 $ 0.47 $ 0.38
Transportation expense $ 0.22 $ 0.14 $ 0.27 $ 0.17
Production taxes $ 0.13 $ 0.34 $ 0.16 $ 0.29
Total production expenses, as adjusted
(3) $ 2.57 $ 2.73 $ 2.94 $ 2.68
Depreciation, depletion and
amortization $ 1.04 $ 1.31 $ 1.32 $ 1.31
Three Months Six Months
Ended Ended
June 30, June 30,
---------------- -----------------
2009 2008 2009 2008
------- -------- -------- --------
POND CREEK FIELD
Net sales volumes (MMcf) 1,312 1,223 2,603 2,446
Per Mcf data ($/Mcf):
Lease operating expense $ 1.14 $ 1.53 $ 1.44 $ 1.57
Compression expense $ 0.41 $ 0.35 $ 0.36 $ 0.36
Transportation expense $ 0.31 $ 0.22 $ 0.38 $ 0.25
Production taxes $ 0.10 $ 0.17 $ 0.13 $ 0.12
Total production expenses $ 1.96 $ 2.27 $ 2.31 $ 2.30
GURNEE FIELD
Net sales volumes (MMcf) 537 550 1,094 1,109
Per Mcf data ($/Mcf):
Adjusted lease operating expense (3) $ 2.60 $ 2.85 $ 2.79 $ 2.75
Compression expense $ 0.58 $ 0.56 $ 0.59 $ 0.52
Production taxes $ 0.18 $ 0.66 $ 0.25 $ 0.59
Total production expenses, as
adjusted (3) $ 3.36 $ 4.07 $ 3.63 $ 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 are
not reflected in the net gas sales volumes. See Reconciliation of
Adjusted Lease Operating Expense.
GEOMET, INC.
CONSOLIDATED DERIVATIVE CONTRACT POSITIONS
At June 30, 2009, the Company had the following natural gas collar
positions:
Volume Sold Bought Sold
Period (MMBtu) Ceiling Floor Floor
--------- -------- --------- --------
July through October 2009 738,000 $ (1) $ 7.50 $ 5.25
July through October 2009 738,000 $ (1) $ 8.50 $ 6.50
July through October 2009 (1) 1,476,000 $ 4.50 $ 3.70 $ (1)
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
(1) In connection with the July through October 2009 natural gas collar
related to natural gas volumes of 1,476,000 MMBtu/day denoted above,
the Company eliminated the existing $10.00 sold ceilings with respect
to all three-way-collars through October 2009.
At June 30, 2009, the Company had the following natural gas swap
position:
Volume
Period (MMBtu) Price
--------- ---------
July through October 2009 492,000 $ 4.47
At June 30, 2009, the Company had the following interest rate swap
positions:
Designated
Effective maturity Fixed Notional
Description date 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 Six Months Ended
June 30, June 30,
---------------------- ----------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Net loss $ (19,386) $ (3,177) $ (107,112) $ (5,319)
Add: Interest expense, net
of interest income and
amounts capitalized 1,413 1,104 2,386 2,400
(Deduct): Other income (9) (35) (8) (29)
(Deduct): Income tax
benefit (11,212) (1,235) (64,108) (2,469)
Add: Depreciation,
depletion and amortization 1,982 2,489 5,018 4,949
Add: Impairment of gas
properties 27,582 -- 167,295 --
Add: Unrealized losses on
derivative contracts 2,144 12,098 1,958 20,745
Add: Stock based
compensation 189 196 501 384
Add: Accretion expense 105 84 213 168
---------- ---------- ---------- ----------
Adjusted EBITDA $ 2,808 $ 11,524 $ 6,143 $ 20,829
========== ========== ========== ==========
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
minority interest before unrealized 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 Six Months Ended
June 30, June 30,
---------------------- ----------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Net loss $ (19,386) $ (3,177) $ (107,112) $ (5,319)
Impairment of gas
properties 27,582 -- 167,295 --
Unrealized losses on
derivative contracts,
net of tax 2,144 12,098 1,958 20,745
Effect of income taxes (11,164) (3,387) (63,952) (6,577)
---------- ---------- ---------- ----------
Adjusted Net (Loss) Income $ (824) $ 5,534 $ (1,811) $ 8,849
========== ========== ========== ==========
The table above reconciles net loss to Adjusted Net (Loss) Income. Adjusted
Net (Loss) Income is calculated by eliminating unrealized 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 losses relate to
derivative contracts that hedge our production in future months. The 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 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 Six Months
Ended Ended
June 30, June 30,
----------------- -----------------
2009 2008 2009 2008
-------- -------- -------- --------
Lease operating expense $ 3,348 $ 3,640 $ 7,918 $ 7,391
Deduct: Produced water disposal fees 77 203 175 501
-------- -------- -------- --------
Adjusted lease operating expense $ 3,271 $ 3,437 $ 7,743 $ 6,890
======== ======== ======== ========
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: 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