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