- 2009 Production Increased 6%
- 2009 Year-end Proved Reserves of 78.4 Bcfe
LEXINGTON, Ky., March 11, 2010 (GLOBE NEWSWIRE) -- NGAS Resources, Inc. (Nasdaq:NGAS) today reported fourth quarter 2009 total revenue of $14.8 million compared to $21.8 million for the comparable quarter in 2008. For the full year, total revenue was $57.8 million compared to $84.4 million for 2008. The results for the fourth quarter and full year reflect reduced drilling activity, lower commodity prices and the impact from the sale of gas gathering assets during third quarter 2009.
In the fourth quarter, the Company reported a net loss of $3.2 million compared to net income of $306,639 in the same period of 2008. The loss per share in the quarter was $0.11, compared to earnings per share of $0.01. For the full year, NGAS reported a loss per share of $0.27, compared to earnings per share of $0.11. Non-cash interest charges of $1.1 million in the quarter and $3.9 million for the year negatively impacted 2009 results. Discretionary cash flow per share was $0.02 in the fourth quarter compared to $0.15. For the full year, the Company reported discretionary cash flow of $11.6 million, or $0.41 per share compared to $21.1 million or $0.78 per share. (A reconciliation of this non-GAAP measure is provided at the end of this release.)
William S. Daugherty, President and CEO of NGAS Resources, commented, "We made significant progress to strengthen the balance sheet and improve liquidity. We reduced debt as we monetized our gas gathering assets, raised equity and restructured our convertible notes. Reflecting the difficult financial environment, we curtailed our drilling activity and returned to sponsored drilling partnerships allowing us to meet our drilling commitments with a reduced drilling budget." Mr. Daugherty added, "We have now completed 48 horizontal wells, and recently extended the laterals from 3,500 feet up to 4,500 feet, while increasing the frac stages. These extended lateral wells have significantly higher initial production rates and should have stronger reserves than our previous shorter lateral wells."
Operational and Financial Highlights for 4Q 2009 versus 4Q 2008:
- Average daily production was 10.2 Mmcfe versus 10.5 Mmcfe
- Total production volumes were 0.94 Bcfe compared to 0.97 Bcfe
- 10 horizontal wells drilled
- Average realized natural gas price was $5.73/Mcf versus $7.62
- Average price for Appalachian production was $6.59/Mcf
- Capital expenditures totaled $4.2 million
Fourth Quarter and Full Year 2009 Expense Review
Depreciation, depletion and amortization (DD&A) expenses were $3.4 million in the fourth quarter 2009 compared to $3.0 million in the fourth quarter of 2008. For the full year, DD&A expenses were $14.0 million, up from $12.4 million in the prior year. The increase was attributable to additions to oil and gas properties partially offset by the sale of gas gathering assets.
Selling, general and administrative (SG&A) expenses in the fourth quarter of 2009 decreased 13% to $3.3 million from $3.7 million in the prior year. As a percentage of revenue, SG&A costs were 22% compared to 17% in fourth quarter 2008. For the full year, SG&A expenses were $11.7 million, down from $14.0 million in the prior year. The decrease largely reflects a reduction in the size of the Company's 2009 drilling partnerships.
Cash interest expense declined 23% in fourth quarter 2009 to $1.1 million and by 8% for full year 2009 to $5.1 million, reflecting the reduction in debt under the Company's credit facility. The increase in non-cash interest expense reflects the application of the effective interest method for accretion of the debt discount for the embedded conversion feature of the Company's 6% convertible notes. Total, cash and non-cash, interest expense was $2.2 million and $9.0 million in fourth quarter and full year 2009, respectively, compared to $1.4 million and $5.6 million in the comparable periods of the prior year.
Operational and Financial Highlights for Full Year 2009 versus Full Year 2008:
- Average daily production was 10.9 Mmcfe versus 10.2 Mmcfe
- Total production volumes were up 6% to 4.0 Bcfe
- 24 horizontal and 10 vertical wells drilled
- Average realized natural gas price was $6.17/Mcf versus $8.89
- Average price for Appalachian production was $7.24/Mcf
- Discretionary cash flow was $11.6 million
- Total capital expenditures were $14.8 million
2009 Reserves
The Company's estimated proved reserves at year-end 2009 were 78.4 Bcfe, compared to 77.9 Bcfe at year-end 2008. Under the SEC's new 12-month average pricing model, commodity prices used in the 2009 reserve estimates were $4.25 per Mcf of natural gas, compared to $5.51 per Mcf at year-end 2008. Under the SEC's old method, utilizing 2009 year-end pricing, the Company would have reported proved reserves of 134.7 Bcfe, or 142.4 Bcfe based on 10-year strip prices.
Subsequent Event
In January 2010, NGAS retired $37 million of 6% convertible notes due December 15, 2010 in exchange for an aggregate of $28.7 million in new amortizing convertible notes due May 1, 2012, plus approximately $7.9 million in cash and common shares. The new notes have a 6% interest coupon and are convertible into NGAS common stock at $2.18 per share. Beginning June 1, 2010, the notes require monthly amortization of principal, payable in cash or common shares, at the Company's election.
Conference Call Information
A conference call will be held at 4:30 p.m. (Eastern) today to discuss the results. The call in number is 1-888-539-3692 or 1-719-325-2412 (international). Conference ID number is 3466618. The conference call will be webcast and can be accessed by logging onto www.ngas.com. A slide presentation, which highlights management's discussion points, will be available on the Company's website. For those unable to listen to the live presentation, the webcast will be archived on the Company's website. A telephone replay will also be available for one week beginning at 7:30 p.m. (Eastern), March 11, 2010, and can be accessed by dialing 1-888-203-1112 or 1-719-457-0820 (international) and entering passcode 3466618.
About NGAS Resources
NGAS Resources is an independent exploration and production company focused on unconventional natural gas basins in the eastern United States principally in the southern portion of the Appalachian Basin. Core assets include over 400,000 acres with interests in approximately 1,400 wells and an extensive inventory for future horizontal drilling. NGAS operates the gas gathering facilities for its core Appalachian properties, providing deliverability directly from the wellhead to the interstate pipeline. Additional information, including the Company's annual report on Form 10-K for 2009, can be accessed on its website at www.ngas.com.
Forward-Looking Statement
This release includes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act relating to matters such as anticipated operating and financial performance and prospects. Actual performance and prospects may differ materially from anticipated results due to economic conditions and other risks, uncertainties and circumstances partly or totally outside the control of the Company, including risks of production variances from expectations, volatility of commodity prices, the level of capital expenditures to fund drilling and the ability of the Company to implement its business strategy. These and other risks are described in the Company's periodic reports filed with the SEC.
| NGAS RESOURCES, INC. | |||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | |||||
| Three Months Ended | Twelve Months Ended | ||||
| December 31, | December 31, | ||||
| 2009 | 2008 | 2009 | 2008 | ||
| REVENUE | (Unaudited) | ||||
| Contract drilling | $7,951,345 | $11,526,921 | $24,279,345 | $35,553,956 | |
| Oil and gas production | 6,388,235 | 7,630,541 | 26,586,422 | 38,522,474 | |
| Gas transmission, compression and processing | 429,774 | 2,667,730 | 6,957,906 | 10,330,234 | |
| Total revenue | 14,769,354 | 21,825,192 | 57,823,673 | 84,406,664 | |
| DIRECT EXPENSES | |||||
| Contract drilling | 5,857,230 | 8,825,212 | 18,185,340 | 27,272,756 | |
| Oil and gas production | 3,759,353 | 2,806,218 | 11,357,397 | 12,600,897 | |
| Gas transmission, compression and processing | 204,127 | 1,020,372 | 3,159,331 | 4,107,763 | |
| Total direct expenses | 9,820,710 | 12,651,802 | 32,702,068 | 43,981,416 | |
| OTHER EXPENSES (INCOME) | |||||
| Selling, general and administrative | 3,254,022 | 3,722,556 | 11,658,541 | 14,005,041 | |
| Options, warrants and deferred compensation | 284,420 | 309,870 | 1,307,194 | 911,561 | |
| Depreciation, depletion and amortization | 3,409,196 | 2,966,962 | 14,019,826 | 12,418,234 | |
| Bad debt expense | — | — | — | 749,035 | |
| Interest expense | 2,157,381 | 1,436,094 | 9,049,931 | 5,575,007 | |
| Interest income | (287,967) | (6,197) | (355,675) | (95,774) | |
| Loss (gain) on sale of assets | 22,591 | (2,988) | (3,346,491) | (14,104) | |
| Fair value gain on derivative financial instruments | (10,249) | — | (14,726) | — | |
| Other, net | 244,664 | 12,121 | 845,560 | 139,176 | |
| Total other expenses | 9,074,058 | 8,438,418 | 33,164,160 | 33,688,176 | |
| INCOME (LOSS) BEFORE INCOME TAXES | (4,125,414) | 734,972 | (8,042,555) | 6,737,072 | |
| INCOME TAX EXPENSE (BENEFIT) | (912,751) | 428,333 | (341,394) | 3,800,797 | |
| NET INCOME (LOSS) | $(3,212,663) | $306,639 | $(7,701,161) | $2,936,275 | |
| NET INCOME (LOSS) PER SHARE | |||||
| Basic | $(0.11) | $0.01 | $(0.27) | $0.11 | |
| Diluted | $(0.11) | $0.01 | $(0.27) | $0.11 | |
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | |||||
| Basic | 30,484,361 | 26,543,646 | 28,256,253 | 26,409,275 | |
| Diluted | 30,484,361 | 26,697,972 | 28,256,253 | 26,910,642 | |
| NGAS RESOURCES, INC. | ||
| CONSOLIDATED BALANCE SHEETS | ||
| December 31, | ||
| ASSETS | 2009 | 2008 |
| Current assets: | ||
| Cash | $4,332,650 | $981,899 |
| Accounts receivable | 7,277,311 | 10,450,173 |
| Note receivable | 6,247,880 | — |
| Prepaid expenses and other current assets | 633,884 | 540,253 |
| Loans to related parties | 75,679 | 79,188 |
| Total current assets | 18,567,404 | 12,051,513 |
| Bonds and deposits | 258,695 | 623,898 |
| Note receivable | 6,766,451 | — |
| Oil and gas properties | 182,189,679 | 229,218,344 |
| Property and equipment | 5,113,093 | 3,285,925 |
| Loans to related parties | 171,429 | 171,429 |
| Deferred financing costs | 1,235,705 | 1,689,580 |
| Goodwill | 313,177 | 313,177 |
| Total assets | $214,615,633 | $247,353,866 |
| LIABILITIES | ||
| Current liabilities: | ||
| Accounts payable | $5,587,290 | $12,362,092 |
| Accrued liabilities | 938,829 | 675,141 |
| Deferred compensation | — | 2,246,439 |
| Fair value of derivative financial instruments | 111 | — |
| Customer drilling deposits | 5,581,877 | 2,262,955 |
| Long-term debt, current portion | 32,534,084 | 24,000 |
| Total current liabilities | 44,642,191 | 17,570,627 |
| Deferred compensation | 651,287 | — |
| Deferred income taxes | 12,559,549 | 12,949,476 |
| Long-term debt | 40,949,836 | 109,270,818 |
| Other long-term liabilities | 3,962,254 | 3,685,849 |
| Total liabilities | 102,765,117 | 143,476,770 |
| SHAREHOLDERS' EQUITY | ||
| Capital stock | ||
| Authorized: | ||
| 5,000,000 Preferred shares | ||
| 100,000,000 Common shares | ||
| Issued: | ||
| 30,484,361 Common shares (2008 – 26,543,646) | 117,142,639 | 110,626,912 |
| 21,100 Common shares held in treasury, at cost | (23,630) | (23,630) |
| Paid-in capital – options and warrants | 4,467,246 | 3,774,600 |
| To be issued: | ||
| 9,185 Common shares (2008 – 9,185) | 45,925 | 45,925 |
| 121,632,180 | 114,423,807 | |
| Deficit | (9,781,664) | (10,546,711) |
| Total shareholders' equity | 111,850,516 | 103,877,096 |
| Total liabilities and shareholders' equity | $214,615,633 | $247,353,866 |
NGAS RESOURCES, INC.
Cash Flow Reconciliation
Discretionary cash flow represents net income, determined in accordance with generally accepted accounting principles (GAAP), with certain non-cash items added back. Although a non-GAAP measure, discretionary cash flow is widely accepted as a financial indicator of an oil and gas company's ability to generate cash that can be used to fund development activities and service debt internally. This measure may also be used in the valuation, comparison and rating of companies in the E&P and other industries. Cash flow is not a measure of financial performance under GAAP and should not be considered as an alternative to net cash flows from operating, investing or financing activities determined under GAAP.
| (Unaudited) | ||||
| Three Months Ended | Twelve Months Ended | |||
| December 31, | December 31, | |||
| 2009 | 2008 | 2009 | 2008 | |
| Net income (loss) | $(3,212,663) | $306,639 | $(7,701,161) | $2,936,275 |
| Non-cash compensation | 284,420 | 309,870 | 1,733,445 | 1,171,251 |
| Depreciation, depletion and amortization | 3,409,196 | 2,966,962 | 14,019,826 | 12,418,234 |
| Bad debt expense | — | — | — | 749,035 |
| Non-cash interest expense | 1,056,255 | — | 3,925,531 | — |
| Fair value gain on derivative financial instruments | (10,249) | — | (14,726) | — |
| Deferred income tax expense (benefit) | (912,751) | 428,333 | (341,394) | 3,800,797 |
| Discretionary Cash Flow | $614,218 | $4,011,804 | $11,621,521 | $21,075,592 |
| Discretionary Cash Flow Per Share | $0.02 | $0.15 | $0.41 | $0.78 |